Two HSBC customers explain how they're tackling the financial challenges ahead
Ashley Ponting, 66, retired driving instructor
Having worked for 35 years as a self-employed driving instructor, Ashley Ponting knows a thing or two about dealing with the unforeseen. "I had a few hairy moments," he says, "including a deer landing right on the front of our car during a lesson, which was certainly a shock for the poor girl who was driving."
Ashley, now retired, spoke at length to his HSBC Premier Account Manager about what he wanted to achieve with the inheritance, and what level of risk he was comfortable with. He now has a range of investments, including two HSBC ISAs.
Ashley has banked with HSBC (and before that, Midland Bank) all of his life, just as his father had done.
The reasons why he's stayed with HSBC all these years? "I'm just happy with their way of doing things." Ashley had an HSBC business account, and had valued the bank's flexibility, given that being a driving instructor can involve sharp fluctuations in incomings and outgoings, meaning that accounts can periodically dip into the red. Ashley reckons he has covered around one and a half million miles while teaching people to drive, and so had to replace his cars quite often.
Now more than ever, Ashley appreciates the personal touch he gets with HSBC Premier, as shown in the face-to-face advice he received about what to do with his inheritance. "It's just great to know that there's always someone you can speak to, and that you're being looked after," he says.
Graham Ellison, 78, retired university professor
"Just doing a simple calculation about five years ago started me thinking about inheritance tax," says Graham Ellison, of Bristol. "I added up our savings and estimated what we'd get for the house, and worked out that our total wealth was above the IHT threshold. Inheritance tax was something at the back of my mind."
A few years later, Graham's wife Barbara lost her two elderly sisters over a period of 18 months, and received an inheritance from their estates. Now the Ellisons' inheritance tax liability was greater, and they realised they wanted to reduce it quickly.
"Our view was that it was much better for the family to enjoy some money now rather than waiting until we died and having to pay 40 per cent in inheritance tax," says Graham, who is father of Huw and Karen, and grandfather of Lauren and Jack.
"We were advised that to save IHT it was possible to change a will within two years of death by creating a 'deed of variation'. This meant that the money from Barbara's second sister could go directly to the children and grandchildren, rather than into our bank account. Gifting seemed like the simplest way to reduce our inheritance tax liability. I suppose we liked the idea of saving on tax and helping the family at the same time.
"We were recommended to make a gift to our grandchildren via a discretionary trust. The advantage of a trust is that it gives you all the IHT savings of making a direct gift but you retain control – it's at our discretion how the cash sum is spent. Our grandchildren are 17 and 15 and we didn't want them spending all the money on designer T-shirts, computer games and cars! We wanted to know that the money could not only help now with school fees, but also help support them through three or four years of university.
"Inheritance tax creeps up on you. I was a university professor for many years, so was never a big, big earner. But house prices go up and I also did pretty well with my investments. I became interested in investing back in the 1960s when I emigrated to America and was working for an aircraft company researching jet engines. A British colleague and I bought some shares on Wall Street one day. They doubled in price, we sold them, and the share price then collapsed.
"When I returned to the UK, I bought a house, had two children, was working at the university and didn't have any money at all for investing. Years later when the children left home I got interested again. I'm not cautious but not a big risk-taker either, although I do have quite a bit of money in emerging markets. The downside is that whenever my investments go up in value, so does my IHT liability. Planning for all this now means that our children and grandchildren can inherit as much of our estate as possible."
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This article originally appeared in the Winter edition of HSBC's Liquid magazine
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