Programme: BA (Hons) Finance and Investment Management
Module Code: AF5007
Module Title: Personal Finance and Wealth Planning – Component 2
Distributed on: Week 1 Semester 2
Submission Time and Date: To be submitted by 12 noon on (TBC).
Word Limit: N/A
Weighting This component accounts for [ 60 ]% of the total mark for this module
Submission of Assessment It is your responsibility to ensure that your assignment arrives before the submission deadline stated above. See the University policy on late submission of work (the relevant extract is set out below).
Please note that assignments are subject to anonymous marking.
Electronic Management of Assessment (EMA): Please note if your assignment is submitted electronically it will be submitted online via Turnitin by the given deadline. You will find a Turnitin link on the module’s eLP site.
Instructions on Assessment:
The Dando Family
Richard and Stephanie Dando live in the North East of England. They own a house valued at around £320,000 and this is owned as a beneficial joint tenancy. They have been married for 19 years and have had no children together. Richard has one 25-year-old daughter, Olivia, from a previous marriage.
Richard is 58 and in good health. He married at 21 but divorced at 35, after which he met Stephanie. He had a clean-break settlement and his ex-wife has no claim on his finances.
Richard’s father is still alive and lives 10 miles away in his own property in Newcastle. He used to have a very active lifestyle and was heavily involved in a local walking group although more recently he has developed a number of health issues. Richard’s mother has recently passed away so his father now lives on his own. The property owned by Richard’s father is valued at £250,000 and he has written a will that leaves this to Richard and his brother Steven. Steven emigrated to the USA some years ago and has US citizenship. Richard is aware that any future care responsibilities will likely fall primarily upon him and Stephanie as his brother lives so far away.
Stephanie’s parents are a little younger. Stephanie is 50 and her parents are in their mid-seventies. They are both in reasonable good health. They live in the South East of England in a small village within commuting distance to the city of London. They own a large house that has a current market value in the region of £1,200,000. They also have some cash based investments amounting to £175,000 and ISAs of £45,000 each. On the first death, they would like to leave the remainder to the surviving partner. On second death they would like to leave as much of this as possible to Stephanie and her younger sister Alice upon their death. They are very keen that the “tax man should not have any of Stephanie and Alice’s inheritance” but do not know much about inheritance tax. They are aware they may have to pay tax but would like to mitigate this where possible. Stephanie’s sister Alice is unmarried with one nine-year-old daughter Emily, Stephanie’s niece.
Employment and Pensions
Richard worked for a television company in the North East from the age of 16 to 35, when he was made redundant. He contributed to a defined benefit pension scheme. He has 19 years of pensionable service and is due to receive his full pension benefits in 2022, when he will be 60. His latest statement indicated his annual pension to be £19,740 per annum in addition to a compulsory tax-free lump sum of three times this amount. This figure will increase in line with inflation. The total transfer value of his pension is £550,000. He no longer contributes to this scheme.
Richard now works for the National Health Service with an annual salary of £28,500. He contributes to a public sector defined benefit scheme. Based on benefits accrued to date, his latest statement predicted an annual pension of £6,130 and a tax-free compulsory lump sum of three times this amount. This is also payable when he is 60. Richard does not anticipate that his salary will change significantly in the next few years and therefore for the purposes of planning for retirement, he bases any plans on these figures, as they are not likely to change much. Richard is very good at his job but is a keen sportsman and would love to have more time to devote to training and competing so is very keen to retire as soon as financially possible. Richard’s death in service benefit (life assurance) is £53,500 and a survivor pension would be payable to Stephanie in this event.
Stephanie is a Senior Lecturer at a local University. She has two pension schemes. She is a member of the teacher’s pension scheme. She contributes 10.2% of her annual salary of £50,100 to this. She is unsure how much her annual pension will be when she retires. She is aware that she has options in relation to the age she can retire and the size of the lump sum relative to the annual pension she can choose to take. She thinks that her pension provides for Richard in the event of her death but is not quite sure. Her full pension will be payable at 67 but the scheme allows members to retire earlier than this but this has consequences to the pension payable.
Stephanie particularly wants to know what her potential pension and lump sum would be at 60 and 67. She loves her job but does not want to be too old when she retires, especially as Richard is older than her.
When Stephanie was much younger, she was sold a private defined contribution pension. This was with Sun Life Financial and the total fund value is currently £74,800. She has not contributed to this scheme for many years but still receives her annual statement showing how the fund has grown. By the age of 65, this pension is forecast to be able to buy an annual annuity of around £2,300 per annum.
Both Richard and Stephanie are due to receive a full state pension at the age of 67.
Richard and Stephanie have heard about the 2015 pension freedoms in the media. They have discussed how it would be useful to access their pension funds for various purposes, including paying off the remainder of their mortgage. They have heard that the reforms allow individuals to access their pensions at 55 but do not know much else about the changes. Richard has heard that it is possible to transfer his defined benefit schemes to a defined contribution scheme to take advantage of the reforms.
Property and other assets
Richard and Stephanie have a joint repayment mortgage with Santander that they took out 17 years ago. The current outstanding balance is £22,000 with two years until the total sum is fully repaid. They currently repay £950 per month.
They have contents and buildings insurance but have no other insurance policies, other than those already mentioned and car insurance on their two cars.
Stephanie owns a small flat in the south of England that she bought when she was 26. She bought the house at the end of June 1995 for £62,000. She lived in it for 5 years but then after this moved away and just used the flat as an additional base when she visited her parents. She has recently put it up for sale for an asking price of £210,000. She does not know if she will have to pay tax on this capital gain. Stephanie also has a painting that she was bequeathed by her grandparents that she intends to sell at auction this year. The probate value was £5,000 and she has been advised by an expert that it is now worth £19,000 and she hopes to realise this. Once both assets have been sold, she wants to use some of the money to build a fund to help provide a university education for her niece Emily, as well as to help her with a small house deposit to buy a property in the future. She wishes to provide £30,000 for this purpose. It is unlikely that Stephanie’s sister Alice will be able to help and Stephanie is keen that Emily should not start life in too much debt. As such, she would like to develop a portfolio of investments to grow her money. She is happy to take on some risk but does not want to have to do much to manage the portfolio, as she is very busy.
Richard was left £17,000 by his grandfather, when he passed away seven years ago. This is invested into £7,000 premium bonds, £3,500 cash ISA and the remainder in a savings account with a local building society. He has had one £25 win and made very little interest over the last seven years. Stephanie has suggested he invests in something that will give a better return but Richard is inherently risk averse. He has however thought that he may be willing to take on a little more risk.
Richard and Stephanie do not have a will. Both would like each other to inherit their assets when they die and have assumed this will happen. After both deaths, they would like Olivia and Emily to be provided for equally. They are not really sure if they need a will and both admit to knowing very little about them or the consequences of dying intestate. They are also concerned on the impact of ill-heath and making sure that if they are unwell, the other can make decisions for them.
Richard’s daughter Olivia lives with her mother. She has been saving for a deposit so that she can move out and buy a property locally. She is not sure on how to proceed. She has saved £5,000 with the help of grandparents. Her gross salary is £25,000 per annum.
Richard and Stephanie have a car loan. They had to buy a car two years ago for £11,500, which they financed with a car loan paying £205 per month for the next two years.
Stephanie has £7,700 on a credit card. She only pays the minimum balance off this each month.
Income and expenditure
Richard and Stephanie have made a rough estimate of their net monthly income and expenditure. They do not wish to substantially change their lifestyle.
Net Income £4,310
Petrol and car related expenses
Season ticket for Newcastle United
Miscellaneous (includes credit card)
Total expenditure £4,310
They like to holiday twice a year for which they set aside around £8,000.
You are to write a client report (2500 words) for the Dando family that covers the following:
1. A financial plan for Richard and Stephanie. (60 marks- see below for allocation)
You should make a judgement about the timescale of this plan, taking into consideration the financial milestones and factors mentioned in the case study.
It should include:
a. A clear breakdown of the couple’s objectives over the short, medium and long term. You should clearly show a financial plan that models the likely changes in the couple’s financial situation from now until the years to retirement, taking into account all of the information in the scenario (you may use excel for this and include as an appendices). You need to determine the key milestones that will change the couple’s income and expenditure between now and retirement and model how these will change their overall financial position. You should consider at least two alternative scenarios you judge possible given the ages of both Richard and Stephanie and their possible retirement ages. (Please note you are not required to re calculate the current net pay of the couple). 10 marks
b. Specific advice regarding the 2014/15 pension reforms. You should make clear to the couple to which pensions they are relevant and what options the couple have as a result. You must provide specific recommendations for Richard as to the final salary scheme transfer, including the advantages and disadvantages of transferring his defined benefit scheme to a defined contribution scheme.
c. Advice regarding any issues mentioned in the case study in relation to capital gains and inheritance taxation (provide supporting calculations), estate planning and care planning (please note that Richard and Stephanie would like to know what the potential impact of care costs could be on their future inheritances). You are expected to use 2019/20 tax year in calculations. 16 marks
d. Based upon the couple’s risk profile, recommend two separate investment portfolios of for Richard and Stephanie. You should consider the funds available, clearly showing where these funds have come from (exclude pensions from this). You should also attempt to model the performance of the portfolio and whether or not it is likely to achieve the goals you stated in part a (you must state and justify your assumptions with regards to growth rates and inflation). 16 marks
e. Provide mortgage advice to Olivia. You should identify appropriate mortgage options and comment on their affordability as well as advising Olivia about other costs (both one off and continuing) of buying a property. You should calculate Olivia’s net pay and suggest a possible monthly budget that may help Olivia manage her money in the first year. 8 marks
You should state any assumptions that you make, but you need to ensure these are from robust sources. You need to identify any information that you would need to seek clarification on from Richard and Stephanie. You are the financial advisor and you should treat the information in the case as if it has been gathered from a first client meeting. Additional information and calculations should be included as appendices. However, these must relate specifically to the case study and support the financial plan you produce. Appendices or tables are not included in the word count.
You must base any calculations on the 2019/20 tax year.
Please note this is not an essay, it is a report for the client. You should write to the client in the report. You need to ensure that any sources are referenced in text and at the end in ‘references’. You should use appropriate sections and clearly show this in a table of contents at the start of the report.
– Total 60 marks
Late submission of work
Where coursework is submitted without approval, after the published hand-in deadline, the following penalties will apply.
For coursework submitted up to 1 working day (24 hours) after the published hand-in deadline without approval, 10% of the total marks available for the assessment (i.e.100%) shall be deducted from the assessment mark.
Coursework submitted more than 1 working day (24 hours) after the published hand-in deadline without approval will be regarded as not having been completed. A mark of zero will be awarded for the assessment and the module will be failed, irrespective of the overall module mark.
These provisions apply to all assessments, including those assessed on a Pass/Fail basis.
The full policy can be found here.
Word limits and penalties
If the assignment is within +10% of the stated word limit no penalty will apply.
The word count is to be declared on the front page of your assignment and the assignment cover sheet. The word count does not include:
• Title and Contents page • Reference list • Appendices • Appropriate tables, figures and illustrations
• Glossary • Bibliography • Quotes from interviews and focus groups.
Please note, in text citations [e.g. (Smith, 2011)] and direct secondary quotations [e.g. “dib-dab nonsense analysis” (Smith, 2011 p.123)] are INCLUDED in the word count.
If this word count is falsified, students are reminded that under ARTA this will be regarded as academic misconduct.
If the word limit of the full assignment exceeds the +10% limit, 10% of the mark provisionally awarded to the assignment will be deducted. For example: if the assignment is worth 70 marks but is above the word limit by more than 10%, a penalty of 7 marks will be imposed, giving a final mark of 63.
Students must retain an electronic copy of this assignment (including ALL appendices) and it must be made available within 24hours of them requesting it be submitted.
Note: For those assessments or partial assessments based on calculation, multiple choice etc., marks will be gained on an accumulative basis. In these cases, marks allocated to each section will be made clear.
The full Word Limit Policy is available here.
The Assessment Regulations for Taught Awards (ARTA) contain the Regulations and procedures applying to cheating, plagiarism and other forms of academic misconduct.
The full policy is available at here
You are reminded that plagiarism, collusion and other forms of academic misconduct as referred to in the Academic Misconduct procedure of the assessment regulations are taken very seriously by Newcastle Business School. Assignments in which evidence of plagiarism or other forms of academic misconduct is found may receive a mark of zero.
Mapping to Programme Goals and Objectives:
This assessment will contribute directly to the following Undergraduate programme goals and objectives.
1. Knowledgeable about the theory and practice of responsible business and management in an international context
Objectives, Students will be able to:
x 1. Apply knowledge of contemporary professional practice in business and management informed by theory and research.
x 2. Apply knowledge of business and management to complex problems in professional practice in order to identify justifiable, sustainable and responsible solutions.
2. Intellectual/Professional Skills and abilities
Objectives, Students will be able to:
x 1. Apply effective interpersonal communication skills and the ability to work in multi-cultural teams.
2. Produce evidence of self-reflection as a means of informing personal development planning
x 3. Demonstrate skills and attitudes for progression to post-graduate contexts including professional work, entrepreneurship and high-level study
3. Personal Values Attributes
Objectives, Students will be able to:
1. Develop an awareness of the cultural and ethical context in which international business operates.
Assessment Criteria (NBS)
General Assessment Criteria
Trait 0 – 29 30 – 39 40 – 49 50 – 59 60 – 69 70 – 79 80 – 100
Knowledge and Understanding Unable to grasp concepts, or to present facts in a relevant way. Some elements of knowledge apparent but question/s inadequately addressed. Basic knowledge-and understanding of subject shown. Work is relevant, however, confusion shown at times. The knowledge base is judged sound and relevant. Thorough knowledge and understanding demonstrated. Exceptional comprehension of knowledge demonstrated.
Structure and Alignment Often inarticulate and can be incomprehensible. Poor structure. Content often irrelevant. Work can lack focus, and is prone to unsubstantiated assertion or logic. Over reliance on description rather than analysis. Perhaps some evidence of unstructured argument or illogical reasoning. Material is well presented and organised. Occasionally, conclusions are reached on the basis of insufficient information. Fluent and focused. Shows ability to contextualise knowledge and sustain a relevant argument or logical reasoning. Sophisticated skill shown in formation of relevant argument or analytical reasoning.
Module Specific Marking Criteria