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Case Studies

Locked into your pension? There really is another way out

Problems

  • Annuity rates within ABC Pension AVC are 3.1% of capital. With a fund value of £800,000 this is low (£24,800 gross pa).
  • In the event of his death, the capital sum is lost through annuity and the income to his spouse would halve (£12,400 gross pa). This represents 1.6% of the original capital value.
  • Having worked long and hard since 1979 the last thing he wanted was for all his money to be lost out of the estate.

Wish list

  • To maximise income and guarantee it as much as possible.
  • To have more control over leaving a legacy for his wife and children.
  • To have more control over the rules of his estate as opposed to someone else setting the rules.
  • A lump sum to pay off the mortgage of £260,000.
  • An income of £4,000 net per month (£48,000 net pa/£80,000 gross pa).
  • To avoid paying pension tax charges.

Measurable results

  • Taking monies from the ABC Final Salary Scheme plus the AVC would give an income of £44,375 gross pa. This is 55% of what he required. We changed this and gave him a facility to take up to £89,500 gross pa.
  • Taking a lump sum from the ABC Final Salary Scheme plus the AVC would give an amount of £351,759. We gave him an amount of £436,189; an extra £84,430 to pay off his mortgage and buy his wife another horse!
  • If he was to die, and assuming tax free cash had already been taken, his wife would receive a total amount of c£20,000. We have been able to ensure that in the event of his death his wife would receive £850,000. If we were to add to this the tax free cash of £436,189 already paid this would give a total of £1.28 million preserved in the estate. If this £850,000 were to be invested at 3% gross this would give an income of £25,500 gross pa but the most important outcome is that the wife has choices and as the money is in the estate it can be passed to the children as a legacy.
  • We saved him £95,000 in pension tax charges and added £386,000 to his estate free of inheritance tax to the children.
  • We designed a portfolio where performance over 3 months is 0.64%, over 6 months is -4.19% and over 1 year is -1.74%. This compares favourably to the FTSE All Share performance over 3 months of -9.71%, over 6 months -34.56% and over 1 year of -35.78% leaving him able to sleep at night!
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Trentham Invest ltd is Authorised and Regulated by the Financial Services Authority. registration number 218325.
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