Case study: Planning for an early retirement

Craig Palfrey CFPTM Chartered MCSI helps his client plan for his dream of working less, earning more and retiring early, through judicious insurance and pension planning and use of ISAs

case study
The brief Craig Palfrey biography

Craig is a CERTIFIED FINANCIAL PLANNERTM professional, a Chartered Wealth Manager and a managing partner at Accredited Financial PlanningTM firm Penguin Wealth, in Cardiff. Penguin Wealth has recently won an Unbiased award for Estate Planning Adviser of the Year.

Craig enjoys presenting at seminars as he is passionate about sharing his knowledge. He is an international speaker on financial planning and has written a book on the subject: The wealth secret: create, build and protect your future the Penguin way
Jason wants to retire early, at the age of 50, with his mortgage paid off and his dental practice at a point where it can be easily sold. For the lifestyle he wants to share with his wife at retirement, he needs a plan that will provide £3,500 per month. This means that he will need to increase his income, while still paying for private education for his two children, keeping up with his mortgage payments and the other expenses associated with running his business. He also wants to reduce his current working week to three days so he can enjoy time with his wife and two children. A tall order!
The planningJason, a 40-year-old dentist, was feeling the pressure of running his dental practice and having to deal with the issues that go with it – such as recruitment and cost control. His practice had 60% NHS clients and 40% private. Jason has to support his wife, Lisa, and two young children. He enjoys his family time and can often be found at the local sports grounds coaching football and rugby. He was at the point where he was thinking of walking away, selling his business and going to work for someone else, which he envisaged would free up the extra time he wanted to spend with his young family.

He was paying private school fees of £7,800 per annum per child, which was escalating at 5% per annum. On top of this, he paid £1,300 per month in mortgage payments and had a business loan, used to purchase dental equipment, at a cost of £2,875 per annum. In doing the analysis, Jason needed to increase his income by £2,800 per month.

Jason’s accountant, Lewis Ballard, helped him work out the business ‘ideal’, which was to have a larger percentage of income from fee-paying clients, instead of NHS clients. This would provide greater predictability of income and value to his business so that the dental practice could be sold as a going concern when the time was right.

When Jason came to see me at Penguin Wealth, I guided him through a structured process to discover exactly what he wanted, and work out a plan to achieve this.

We began developing a financial plan to help Jason fulfil his personal and business goals. We needed to plan for Jason to retire at age 50, following the sale of his business. So we needed to establish whether he could afford to retire on the level of income he wanted and whether the business was in a suitable position to be easily sold.

My major concern was for the family security. Jason had nothing in place to provide his family with any financial security apart from the death-in-service benefits provided by his NHS work. This needed rectifying as a priority. Many people who focus on the future can have a habit of not thinking about what would happen in the event of illness or death.

What we did

After going through our structured planning process we arrived at the key objectives for Jason, his wife Lisa and two children, aged nine and 12. His ideal is to be able to retire at 50, to lead a comfortable life and for him and his wife to go travelling in their campervan – which they love. In the shorter term they want to work towards Jason working a three-day week so that they can enjoy family now as well as in the future. They also want to ensure that their children have been privately educated as this is important to them. The financial objective for age 50 is to have an income of £3,500 per month. The mortgage will be paid off by then and we planned the school fees into the cashflow to ensure they can be paid as they arise. It is useful that the youngest will reach 18 as Jason reaches 50 and retires!

We went away and did some maths, which included taking realistic business projections from the accountant. The financial plan showed that they need the business, and the property it is in, to sell  for £800,000 when Jason is 50 to make sure that they don’t run out of money during retirement. The business  projections  suggested  this would  be achievable – making some assumptions for inflation, increases in property price and business growth, which were all agreed with Jason and the accountants. We also looked at the couple’s pension situation. Jason will accrue NHS pension benefits on top of a personal pension currently valued at £68,000 while his wife, who works in the practice, also has a personal pension of £48,000 to which the business had been contributing £600 per month.
"One of the key things we did was put the life insurance and the pension death benefits into a series of family trusts"

We arranged for pension contributions for Lisa to be doubled, with ad-hoc lump sum contributions to be made as and when cashflow allows it. We identified that they were under-insured should something happen to one or both of them and, on the assumption that the business value would be lost without them, we arranged relevant life insurance to protect their young family and ensure their standard of living could be maintained. Jason was insured for around £1m and Lisa £400,000. We then arranged a locum insurance policy so that, should Jason not be able to practise dentistry due to illness or injury, the insurance would cover the costs of a locum dentist and not affect the couple’s drawing from the business.

One of the key things we did was put the life insurance and the pension death benefits into a series of family trusts. This gives protection so that, should something happen to either of them, the money can be controlled on behalf of their young children, enabling them to be raised in the lifestyle they want for them, including private schooling. It also protects the money from potentially exiting the family should the surviving partner go on to remarry, as well as saving 40% on inheritance tax.

Jason and Lisa have used some of their ISA allowances over the past few years to build additional savings. This will continue to be reviewed each year to see if they can afford to use this valuable tax allowance as and when their finances allow. The key to the financial planning is to continue to review the plan and the numbers on a regular basis to ensure everything stays on track over the years, especially when Jason and Lisa get closer to 50.

What happened next

By working with me to develop this financial plan, Jason is now able to work four days a week and is looking towards a three-day week. He has put an office manager in place to run the dental practice and is in  the process of buying another practice and putting people in place to manage it. With the help of coaching from his accountant and from us, Jason has increased the ratio of private clients from 40% to 55%, and rising. He is now enthusiastic about working in and growing the business because he can see the light at the end of the tunnel – the fulfilment of his ambition to retire at 50 with the lifestyle he and Lisa desire.


Increase Lisa's pension.
2. Protect young family in the event of Jason's demise, using wills and trusts.
3. Put lasting powers of attorney in place to ensure the couple's wishes are carried out in any event.
4. Put pensions onto a platform and create a coherent investment strategy to ensure everything is cost effective.
5. Make use of ISA allowances.
6. Review the plan regularly to ensure everything stays on track.

This article was originally published in the Q2 2017 print edition of The Review. The print edition is available to all members who opt in to receive it, except student members. All eligible members who would like to receive future editions in the post should log in to MyCISI, click on My Account/Communications and set their preference to 'Yes'.
Published: 25 May 2017
  • Financial Planning
  • 25th anniversary edition
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