Sally & Alberto’s retirement case study

Sally and Alberto are 57 and 55 years old respectively. See how they managed the assets they’d accumulated over their working lives and find out how it served them throughout retirement.

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek independent advice. The past performance of investments is not a reliable indicator of their future performance.


Sally and Alberto are 57 and 55 years old respectively. Both work full-time. Alberto is a self-employed electrician and Sally is a midwife in the local hospital. They have three grown-up children.

Alberto and I met at school and were childhood sweethearts. As soon as we completed our studies and became qualified in our respective fields, we took the plunge and got married!

Despite qualifying in her early twenties, Sally delayed starting work until her thirties when her oldest child started at secondary school.

Sally’s employment means she is entitled to a Defined Benefit (DB) pension (where the amount of pension paid is based on how many years you've worked for your employer and the salary you've earned) at retirement. Meanwhile, Alberto has made regular contributions to a Defined Contribution (DC) pension (where the amount of pension you receive is the total of all your contributions plus any investment return received over the life of the plan).

Now that our three children are no longer financially dependent on us, having grown up and moved out of the family home, we are now in a position to focus on our own financial future. We are looking to pay off our mortgage in the next five years, and have recently been reading a lot about pensions for the self-employed to make the most of the tax relief available – it’s never too late to start saving for the future.

Tax rules can change and their effect on you will depend on your individual circumstances.

Financial assets

Following the recent passing of Alberto’s mother, the couple have inherited a relatively significant cash sum which is currently held in a savings account.

My DC pension, Sally’s DB pension, our ISA accounts, and the recent inheritance mean that we have £440,000 in assets.

Figure 1: Asset breakdown (on day 1)

What are Sally and Alberto’s goals for retirement?

We would both like to stop working in the next year and potentially move to a smaller house to be closer to our children and grandchildren. Downsizing should allow us to offset the costs of moving.

At the same time, Sally and Alberto both enjoy taking trips and keeping healthy.

We would like to continue taking quality holidays for the next decade or so, at least until we are 70. We also want to continue enjoying our evening membership of the local spa and gym.

What was the outcome for Sally and Alberto?

Although it’s hard to think about these things, Sally and Alberto understand their life expectancy is around the mid-eighties – technically 83 for Alberto and 81 for Sally according to the Office for National Statistics (ONS).

Based on this, they decided to drawdown from their retirement savings straight away. This will allow them to have reasonable cash surplus of c. £100,000 when they reach their life expectancy (Figure 2).

Should either one of us live beyond our mid-eighties, we will still have a reasonable capital sum to support us in later life. Alternatively, this money could form a useful inheritance for our children and grandchildren.

Figure 2a: The annual surplus/shortfall over time based on Sally & Alberto’s annual income and expenditure

Figure 2b: The remaining value of Sally & Alberto’s retirement savings over time

This scenario is based on an assumed rate of return of 2.5% per annum. The actual rate of return could be higher or lower, which would result in different outcomes.

The annual income is made up of employment income, dividend income, pension, and state pension. The state pension amount is the current maximum and is only an example. The amount you get depends on your National Insurance contributions’ record and your individual circumstances. You can get a State Pension forecast by visiting GOV.UK View - Check your State Pension.

The annual expenditure is made up of essential, supplementary, and luxury expenditure.

For a breakdown of the annual income, annual expenditure, and the annual income surplus/shortfall, refer to the Appendix.

Did Sally and Alberto have any other options to consider for their retirement?

Sally and Alberto have a number of options available to them. They could consider reducing their income, or increasing their spending.

Although we both enjoy our respective jobs, it’s nice to know that we could work part-time rather than full-time, or even give up work straight away if we wanted to. We both love cycling and the extra free time would allow us to go away more regularly with our friends who have already retired. Alternatively, we could upgrade our gym membership to full-time, or perhaps even splash out on that 5-star holiday we’ve always wanted!

Additionally, there is always the option to reduce capital.

Although those options certainly appeal to us, it feels more important to support our growing family. If we gift some surplus capital to our children, not only will it give them a much-needed boost to help with the grandchildren’s education costs or getting on the housing ladder but it will also be excluded from our estate for inheritance tax purposes (assuming we live for a further seven years after passing on the gift due to the seven-year inheritance tax rule). Also, we get the pleasure from seeing them enjoy it.

The following table shows the assumptions we have used in our calculations.

Figure 4: Growth rate assumptions

Growth Rate Assumptions (%pa) Nominal Real (Implied)
Inflation 2.5%
Income growth 2.5% 0.0%
Expenses growth 2.5% 0.0%
Asset growth1 2.5% 0.0%

Important considerations

This example is based on current law and tax rates. These may change in the future and income tax will depend on individual circumstances.

Money paid into a pension cannot be withdrawn until you're aged at least 55 (this is rising to 57 on 6 April 2028). Bear in mind this may increase further in the future.

This scenario is based on an assumed rate of return of 2.5% per annum. The actual rate of return could be higher or lower, which would result in different outcomes.

All investments can fall as well as rise in value and you can lose some or all of your money.

This communication does not constitute an investment recommendation or tax advice.

We don't offer personal financial or tax advice, so if you're not sure about investing, seek independent advice.

If you live in Scotland or Wales you may have a different income tax rate or band.


Figure 1: Income
Term (Yrs) Period Client's ages Description Employment Dividend Pension State Total (Gross) Total (Net) Tax rate2
10 Years 1–10 58–67/55–65 Retired (DB) £ Nil £ Nil £22,500 pa £ Nil £22,500 pa £20,500 pa 8.9%
2 Years 11–12 68–69/66–67 Retired (DB + 1SP) £ Nil £ Nil £22,500 pa £9,000 pa £31,500 pa £27,700 pa 12.1%
31 Years 13–43 70–100/68–98 Retired (DB + 2SP) £ Nil £ Nil £22,500 pa £18,000 pa £40,500 pa £36,700 pa 9.4%
Figure 2a: Expenditure
Term (Yrs) Period Client age Description Essential Supplementary Luxury Total
3 Years 1–3 58–60/56–58 Mortgage to 60 £27,000 pa £20,000 pa £15,000 pa £62,000 pa
9 Years 4–12 61–69/59–67 Mortgage Repaid £15,000 pa £20,000 pa £10,000 pa £45,000 pa
31 Years 13–43 70–100/68–98 Retired Fully £15,000 pa £15,000 pa £5,000 pa £35,000 pa
Figure 2b: Income surplus/shortfall
Term (Yrs) Period Client age Description Income (Net) Expenditure Annual surplus / shortfall Discrete (Term) Cumulative
3 Years 1–3 58–60/56–58 Retired (DB)/Mortgage to 60 £20,500 pa £62,000 pa -£41,500 pa (for 3 years) -£124,500 -£124,500
7 Years 4–10 61–67/59–65 Reitred (DB)/Mortgage Repaid £20,500 pa £45,000 pa -£24,500 pa (for 7 year) -£171,500 -£296,000
2 Years 11–12 68–69/66–67 Retired (DB+1SP)/Mortgage Repaid £27,700 pa £45,000 pa -£17,300 pa (for 2 years) -£34,600 -£330,600
14 Years 13–26 70–83/68–81 Retired (DB+2SP)/Retired Fully3 £36,700 pa £35,000 pa +£1,700 pa (for 14 years) +£23,800 -£306,800
17 Years 27–43 84–100/82–98 Retired (DB+2SP)/Retired Fully £36,700 £35,000 pa +£1,700 pa (for 17 years) +£28,900 -£277,900

Source: Barclays