Case study · Cash and gifting
Cash that was only ever there for comfort.
Can we give some of this away, or are we being too cautious?
01
Where they started
Both partners are senior professionals, one of them a barrister. They enjoy their work and live well within their means. Over the years they had built substantial pensions and investments. They had also accumulated a large amount of cash, which they kept untouched as a safety net.
Like most of the people we meet, they felt they would be fine. They had never seen it. Without a picture of the decades ahead, the cash felt like the only thing standing between them and a bad outcome.
02
The question they brought
They did not come to us to choose investments. They wanted to know two things: whether they were being more cautious than they needed to be, and whether they could afford to help their two children now, while it would make a difference. If so, how much?
03
What the forecast showed
Before the meeting we gathered the details of their pensions, investments, cash, income and spending. In the meeting we built the forecast in front of them and changed it as we talked.
On the assumptions we agreed, what they already held in pensions and investments was more than enough to fund the life they described. The cash was not needed for that. It had only ever been there for comfort.
Their first reaction was relief. The second was a run of better questions.
04
What we challenged
A forecast is only as good as its assumptions, so we tested them rather than accepting them. We tried the result against less comfortable cases, such as higher spending than they had told us and weaker markets, and agreed the margin they were comfortable keeping.
The margin narrowed, as it should. The conclusion held.
05
What they decided
We looked at the tax position of each gift alongside, so every decision was made with it in view.
- Give a large part of the cash to their two children now, instead of leaving it to be inherited later.
- Keep passing on their accumulated surplus income each year to help their children.
- Stop treating cash as the safety net, and let the plan do that job.
06
What changed
The cash became something they could use, not something they held. They stopped asking whether they were being too cautious and started deciding how to help their children while they could see the effect.
The question that had sat unanswered for years now had an answer, and they could see why.
Illustrative examples. Forecasts are hypothetical, rely on assumptions and are not guarantees of future outcomes.
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