Purpose of the letter (model opening)

The purpose of this letter is to express in high-level terms how we agreed upon your financial needs, including any personal requirements you may have, and then link that to the recommendation I have made. This letter should be read in conjunction with the attached suitability report, which of necessity is lengthy and technical in parts.

This report is focused primarily on your request for advice and guidance on planning to make a withdrawal from your personal pension plan with Transact equivalent to 25% of the fund value, this being the maximum allowable as tax-free cash. The purpose of the withdrawal is to provide your daughter Kate with funds sufficient to place as a deposit on the purchase of a private residence in her name.

Summary of the client’s situation

A summary of my understanding of your current financial situation, needs and objectives is contained in the attached documents.

Overall, you retired from full-time employment a few years ago and have been living reasonably frugally ever since, while at the same time drawing upon your savings according to your original retirement plan.

Your state pension is due to commence in September next year and, in the meantime, you would welcome some additional income from your Transact pension to the value of £5,000 a year gross for the next few years. Income tax at the rate applicable to you will be deducted at source, which implies that your after-tax income paid to you by Transact would be £4,000 per year. You may review this after your state pension commences, in line with your then-current pattern of spending, which you intend to increase to provide for more out-of-season holiday trips and travel.

Needs and demands (as agreed in discussion)

During our discussions you clearly expressed the following needs and demands:

  • Support for Kate — you wish to provide meaningful financial assistance to enable her to buy her first property in London. This is a high priority for you.
  • Flexible income in early retirement — you want the ability to draw a modest income from your pension over the next few years (particularly to fund holidays and leisure activities) while you wait for your State Pension to start. You are comfortable with annual withdrawals of £5,000 gross (£4,000 net) for the time being, with the flexibility to reduce this amount later.
  • Capital growth with controlled risk — you are targeting an average annualised return of approximately 5% on your invested funds, while accepting short-term volatility of up to 10% over any 12-month period. You do not wish to take unnecessary risk but are prepared to remain invested in growth assets for the medium to long term.
  • Preservation of options — you want to keep your pension arrangements flexible rather than purchasing a lifetime annuity at this stage, so that you can adjust income levels and leave a meaningful legacy for Kate.
  • Simplicity and peace of mind — you want clear, straightforward arrangements with a trusted investment manager and minimal ongoing administrative burden.

What a complete covering letter would still add

The live Resources example stops after the needs list. A full letter in the letter-plus-indexed-report model would add one more step: a short, plain-English link from those agreed needs to the recommendation, then a pointer into the relevant sections of the attached suitability report.

We deliberately do not invent a fictional product recommendation here. The teaching point is structure — purpose, situation, agreed needs, bridge to the report — not a sample “buy this fund” paragraph. Risk warnings and full rationale belong in the suitability report; see How to write a suitability report under COBS 9.

Use the example as a tone and structure check: open with purpose and scope; summarise the situation in the client’s story; list needs the client would recognise; bridge briefly to the recommendation and indexed report — then stop. Optional Virtual Paraplanner remains suggest-only; adviser review owns every word that reaches the client.