As the ex-sales director of a financial services company, Sean Ryder knows how to manage money. But a diagnosis of bipolar disorder two years ago has dramatically altered his financial circumstances.
The 54-year-old father of two lives in Bath with his wife, who works in education. The couple own their £350,000 home outright and are debt-free. “We are considering equity release on our property, or perhaps adding a storey to our annexe and taking in lodgers if money becomes too tight,” says Ryder.
Stress through overwork is a common contributory factor in the mood swings that characterise bipolar disorder and after his diagnosis Ryder sold half the business he co-owned, and is currently semi-retired. As a result, his annual income dropped from around £20,000 to the £3,360 he now receives in incapacity benefit. His wife takes home more than £15,000 a year and the couple draw out £1,000 a month from the sale of Ryder’s business to add to the household pot. However, the family have had to cut back on luxuries and some savings. The difference, says Ryder, has tipped the balance from having plenty to having sufficient.
The couple are concerned that they will not have a good standard of living in retirement. “With one in four odds of going into a nursing home I feel somewhat exposed,” says Ryder. “However I’m more inclined to self-insure than buy an insurance product.”
The couple have life assurance, which will cover them until pensionable age, and although Ryder is not contributing to a pension, he has £400,000 in a self-invested personal pension (Sipp). Mrs Ryder puts in 4 per cent of her salary to a company pension scheme.
Brian Carter, certified financial planner at NW Brown Pensions & Financial Planning, says that missing from Ryder’s financial review is what state pension he and his wife will be eligible for. “He and his wife should each complete the Department of Work and Pensions’ BR19 form to obtain a forecast of their state pensions,” says Carter. “These should provide a reasonable element of his target retirement income of £25,000 per annum and allow him to feel more relaxed.”
The couple have around £250,000 in building society accounts, Isas and bonds. “£70,000 of this was a gift from my brother, which we want to treat as a last reserve,” says Ryder. “It’s easy for money to get swallowed up but I would like to do something clever with it if I could.”
Carter says: “The balance of his funds can be viewed as their long-term retirement fund. I believe that this is best managed by a discretionary fund manager who will invest in a portfolio of stocks and shares. Direct investment should carry lower costs than via collectives and a bespoke fund manager should be able to tailor the portfolio.”
“I am content to see that their financial holdings are somewhat risk-negative,” says Jonathan Davis, certified financial planner at Armstrong & Davis. However he advises that the structure of Ryder’s Sipp be changed. “Instead of a static diversified portfolio, I would recommend he has his pensions managed by active asset allocators who will move between asset classes according to investment conditions,” he says.
Davis calculates that if Mrs Ryder works until she is 60 the couple should achieve their objective of a retirement income of £25,000. However, he cautions that the margin for error is slim.
According to Carter, the couple’s current capital should cover their income requirements, subject to any financial shocks such as nursing home costs. To cope with possible emergencies, Carter suggests increasing their cash float to £40,000.
Robert Lockie, certified financial planner at Bloomsbury Financial Planning is not as keen on managed funds as the other advisers. He recommends low-cost index trackers instead. He also notes that Ryder’s exposure to markets outside the UK is minimal. “Since adding international exposure increases diversification and thus reduces risk, there is no benefit to excluding it,” he says.
Davis would like to see Ryder have greater exposure to commodities. “According to Jim Rogers – quoted in the FT last year – the shortest commodities boom was 15 years and the longest 23 years so the current one has a long way to go.”
Ryder and his wife are also concerned about the inheritance tax bill that their two daughters may face. However Ryder believes they have at least protected the house via their mirror wills, which divide the nil-rate band between the two children and give the rest to the survivor. Lockie says the couple should have enduring powers of attorney drawn up. “This would allow them to appoint someone they trust to handle their affairs should they become mentally incapable of doing so,” he says.
Names have been changed
