Case Studies
Here’s a range of typical financial scenarios presented to us by clients, and their successful outcomes
Technology Compliance
Final Salary Pension
1. Problem
52-year-old Raymond is Director of Technology Compliance in a Law firm. From his previous employer, he has a deferred Final Salary Pension arrangement. He wishes to retire at age 55 with an equivalent income to that which he receives presently. He received a cash equivalent transfer value (CETV), guaranteed from June to September, which was twice that which he received last year. He wishes to pass on the whole pot to his wife and child when he dies as opposed to just 50% of the pension to his wife.
He wanted an explanation of the various options open to him; advice on what options would suit him and his wife to meet their future needs, and all assistance necessary to achieve those goals.
2. Trentham’s Solution
We analysed the options of staying in the scheme and taking early retirement at age 55, and normal retirement age 63 versus taking the transfer value on offer today, taking early retirement at 55 or taking the money at an equivalent normal retirement age 63. We also illustrated the death benefits to his wife and child for all scenarios.
The data and results were put into a stay column and a transfer column. The data was then highlighted to show the highest number in each scenario.
We concluded the total number of highlighted boxes in the stay column was zero and in the transfer column was six.
We concluded they should take the cash equivalent transfer value on offer. We also covered the scheme funding position, the impact on him if the scheme went into financial difficulties, their attitude to investment risk, their investment experience and concerns with investing, our process and due diligence for investment design, build and ongoing maintenance.
We opened a new pension pot, transferred the sums and his fund is now monitored on our wealth tracking system, which gives Raymond the confidence his money is being proactively managed.
3. Measurable Results
Pension of £29,549 per annum if he took early retirement from the final salary pension scheme compared to £49,031 pa if he transferred out, achieved 4% growth on the pot and took an income equivalent to 4% from the pot.
On death, his wife would get £1,089,720 lump sum versus £20,440 per annum from staying in the scheme.
She would have to live 53 years to get the capital back.
Flexibility to increase, decrease or cease pension income at any time subject to scheme limits.
Flexibility to access his resource without penalty by taking a cash lump sum.
Legacy worth approx. £1million can be left to family. There would be no such legacy if he stayed in his company scheme.
Insurance Company Pension
Pensions
1. Problem
Robert was age 54 when he decided to investigate his options from a previous pension scheme that he accrued whilst he worked for a large insurance company. He thought he would obtain a transfer value and take a look at some figures. The problem was that when he received all the paperwork he couldn’t fully understand the numbers. The statement showed his pension at date of leaving May 2008 but did not show the amount of pension it had risen to today. The transfer value was quoted April 2017 which was 9 years later. The statement also showed an early retirement pension after penalties; but we didn’t know what the penalties were. Again we couldn’t see the true value of the pension. Typically they are 5% per annum and being 4 years before retirement age this could equate to 20%.
He had heard of the transfer options as colleagues were looking into their options knowing they can take pension freedoms and have more money. The transfer value was due to run out in July - 8 weeks’ time, which was sufficient time to make a confident decision whether to take the transfer value offered or not.
- Robert is divorced
- He lives with his partner
- He would like to release a lump sum from his pension to extend his home and achieve some life goals
- He would like to preserve his wealth for his children/partner
- When he left employment the pension built up was £12,052 per annum
- The scheme normal retirement date was at age 62.
- The scheme was underfunded by 47%.
- Robert wanted to ensure that his partner would benefit in the event of his death. He also wanted to explore the new pension freedoms; being able to leave his pension pot to his family.
2. Trentham’s Solution
We analysed and interpreted the data:
Staying in the scheme
- The pension built up to June 2017 is £13,877 per annum
- The expected pension at age 62 is £17,389 per annum
- If he takes the pension at age 55 it is expected to be c£10,277 per annum
- If he dies before age 62, his partner will get none of the pension
- If the pension scheme goes to the ‘lifeboat’ pension protection fund, Robert could end up with anything between £7,216 per annum and £12,489 per annum.
Taking alternative choices if he jumped out of the scheme
- The pension at age 55 could be £22,755 per annum
- The pension at age 62 could be £29,944 per annum
- If he died beforehand, his partner would get a lump sum of circa £568,881 today, plus growth over time. Assuming 4% growth on the capital sum to age 62 this is £748,609
- The risks of the capital sum being eroded by volatile markets are reduced by using strategies to ensure the monies are invested in low risk stocks.
3. Measurable Results
By transferring the pension and responsibility to him, Robert has taken control of his pension pot. He is not left to the vagaries of the pension lifeboat where his pension could drop from an estimated £17,389 to £7,216 per annum
He has increased his pension at age 55 from an estimated £10,277 per annum to £22,755 per annum
He has increased his pension at age 62 from an estimated £17,389 per annum to £29,944 per annum
He has increased the protection to his family from an estimated £nil per annum to £598,881 lump sum - increasing as the capital grows
The monies have been carefully invested in low risk stocks to protect them from market shocks
On the death of him, the balance (after tax) would be inherited by his children - unheard of with a company scheme. This amount could be circa £598,881.
Robert is now very happy to be in control of his life and family having taken control of his own pension and now his future wealth.
Note: The events and figures quoted in this case study are from a real Trentham Invest client; however, the names have been changed to protect client confidentiality.
“Is my Pension full of holes?”
Pensions
Client comments
“I first came across your name and company in a press article on Final Salary Pension transfers and, as somebody that himself works with occupational pension schemes, I knew that I wanted this firm to provide me with advice on my own pensions. Every aspect of the service has been first class from initial contact to all ongoing work. The clarity, thoroughness and quality of work and advice has been exemplary - for somebody like me, Nicola’s insights and willingness to challenge my own assumptions has been most welcome.”
1. Problem
Jason works in the investment world of Financial Services. He has a pension from a previous employer and is interested in moving the pot away form that scheme and to manage it in his own way. He has received a transfer value February 2017 but it runs out mid April 2017. He would like control over the investments but he is not sure of the offer he has been given is a good one. He has also learned that he needs a qualified IFA to sign off the transfer advice.
If he does nothing with the information then he may lose significant flexibility relating to his investments and pension income.
As an investment adviser to a number of Final Salary Pension schemes, he is concerned that his pension will be ‘full of holes’ too.
2. Trentham’s Solution
We agreed with Jason to illustrate a few scenarios.
- Comparison of the two schemes - stay or transfer - looking at revalued pension to date, early retirement at age 55 and a projection to normal retirement date.
- These illustrations also showed the benefits to his wife Sarah.
3. Measurable Results
Staying in the scheme at early retirement would give £4,329 per annum versus £9,345 per annum if he transferred
In the event of his death his wife would get £2,165 per annum versus £233,638 lump sum.
At normal retirement age 65, he would get £6,606 per annum if he stayed versus £12,298 per annum if he transferred.
The projected figures assumed 4% growth on investments.
A total of over £160,000 was transferred to their family balance sheet.
Note: The events and figures quoted in this case study are from a real Trentham Invest client; however, the names have been changed to protect client confidentiality.
Approaching Retirement – My money is under threat
Pensions
1. We work with
People who are in their mid to late 50s, married, with children. Directors of UK companies who earn approximately £150,000 - £250,000 per annum.
Who –
Have several pensions with previous employments and current employer; have bags and files of pensions who have received a pension statement notifying them of a threat that is about to take place on their pension and they need to make a decision in a short timescale to protect their hard earned wealth.
We help them to –
Understand the threats, and then navigate a path to avoid them. We do this swiftly, accurately, planned well, executed well, on time, exactly as promised.
2. Example
In October 2016, Mr O, aged 62, had accumulated 2 pensions since 1992. He received a notification implying that an existing 35% bonus could be withdrawn at any time, due to current market conditions. He decided he needed to extract his funds from his pensions as soon as possible, but was unsure how to do this in the most advantageous way.
The problem was –
One of the pensions he had accumulated incorporated a large protected tax free cash element, meaning he was entitled to more than the standard tax free sums. If he simply transferred the monies to another pension fund he would lose that entitlement. He also needed to ensure that any funds remaining after tax free cash was withdrawn were both productively invested and easily accessible if required. The options outlined by Equitable Life related only to Equitable Life; they did not show him what else he could achieve elsewhere in the market.
We –
Analysed the pensions in the context of current pension legislation, and compared the benefits that could be achieved by simply moving the funds directly to another pension provider with the benefits that could be achieved by moving the funds in a series of steps designed to fully protect the tax free cash. We drew a diagram to map out the route and way forward. The project was to be undertaken in two phases: first to remove the 35% threat and protect the tax free element, then to release the maximum tax free cash and provide flexibility in the future management of the remaining funds.
As a result –
We removed the risk of a 35% loss, saving £77,000 of his hard-earned investment.
We also ensured that he was able to withdraw £134,803 of protected tax free cash, compared with just £49,500 he would have received if he had simply transferred his fund direct to a different pension provider: an additional £85,303 extra tax free cash as a lump sum. Finally, we ensured that his remaining fund was invested in an accessible, balanced portfolio that suited his expressed risk/reward profile.
A huge ‘leg up’ on retirement and life goals.
Taking Retirement Plans Back in Hand
Pensions
Client comments
When we set out on this journey, I felt as if my retirement plans were in the hands of others. There were a number of uncertainties around the companies’ pension plan and the benefits were reducing. The DB scheme was closed and was under severe funding pressure.
We now have a clear direction and plan.
The options were clearly set out and I was able to make informed choices.
The enhanced lifetime allowance protection that has been secured as part of the review process is also a valuable benefit.
1. Problem
John left the ABC Pension Scheme in 1998. He also had a number of other schemes that he had accrued over the years.
Now, a 57 year old director working in the railways sector and married with four children, John wanted to know what he should do about his pension as he neared the scheme normal retirement date, 65. He wanted to pay off his £200,000 mortgage. His net income is £6,428 per month.
John also wanted to have an income of £50,000 per annum after tax in retirement and afford a holiday each year. Achieving these goals would make him feel elated, safe, relieved, satisfied, excited and happy.
He didn’t know where to start other than take the early retirement options. He was also aware of lifetime allowance limits but he had no idea what strategy to adopt to ensure he maximised his resources.
Whilst access to the tax free lump sum of £10,600 looked attractive though early retirement, John would be forced to start drawing his pension of £1,597 per annum even if he carried on working.
He didn’t need the income; but he did want the tax free lump sum. In the event of his death in retirement his wife Catherine would receive 60% of his pension payments. Upon her death the children would receive nothing from the pension.
2. Trentham’s Solution
John needed infallible direction, not just choices. Through broad thinking and meticulous analysis of financial data, Trentham Invest were able to show John and Catherine the consequences of each choice and confidently recommend the best course of action.
The key to their new plan was for John to transfer out of this pension and amalgamate this with is other arrangements into one pot. By moving them altogether, his newly acquired pot became £1,162,414.
3. Measurable Results
If John left ABC Pension Scheme where it was the projected pension at 65 was £3,800 per annum
If he died his wife Catherine would get £2280 per annum
If Catherine died their children would get nothing
Taking early retirement benefits would give John £2,267 per annum or £10,649 and a reduced pension of £1,597 per annum
By taking the transfer value on offer, John could get access to £17,892 capital sum now versus £10,649. That is 68% more tax free cash.
By transferring the benefits, Catherine would get the pot of £71,571.
If she died the children will get the pot passed on to them.
By amalgamating the pensions John can have access to £290,500 to pay off his mortgage now, take no further income and carry on working.
In the event of his death, Catherine will get the unspent pot of £871,000. In the event of her death, the children will get the unspent pot.
By applying for lifetime allowance protection, John has saved £137,500 in lifetime allowance tax charges.
With no mortgage, John will be able to save £31,320 per annum. This could be used to purchase their holidays.
Note: The events and figures quoted in this case study are from a real Trentham Invest client; however, the names have been changed to protect client confidentiality.
Approaching Retirement – How much can I expect?
Pensions
1. We work with
People who are in their mid to late 50s, married, with children. Directors of UK plc companies who earn approximately £150,000 per annum.
Who –
Have several pensions with previous employments and current employer; have bags and files of pensions that they do not understand.
We help them to –
Know what tax free cash and pension income they can expect to release from these financial resources and how that fits in with their current lifestyle.
2. Example
Mr C who was aged 56 at the time and was looking to build an extension on his main home and undertake renovation on a property for circa £200,000. He had accumulated six pensions throughout his career and despite being a fully qualified commercial director could not make head or tail of the statements.
The problem was –
They were all written in different formats, with different retirement ages and so on. He thought his maximum tax free lump sum was £153,000 but by taking this he would start an early retirement pension income which he did not want or need. If he died, his wife J, would get £15,600.
We –
Analysed the benefits that could be taken from the existing pension options and compared them with alternative benefits that could be taken elsewhere.
We set out the options of taking the benefit as they are versus taking the benefits using alternative options.
| Pensions as they are | Alternative | |
|---|---|---|
| Tax free cash: | £153,146 | £285,218 |
| Income now: | £23,385 per annum | £42,782 |
| Income later: | £29,934 per annum | £59,000 per annum |
| Death to Spouse: | £15,600 | £42,782 per annum or £855,658 lump sum |
| Legacy to Family: | Nil | £855,658 |
| LTA value: | £840,000 | £1,280,883 Increased value of £440,883 |
As a result –
He has a greater cash lump sum £110,000 better off; Pension in retirement £30,000 better off; pension for Spouse £855,000 better off; Legacy for Family £855,000 better off.
A huge ‘leg up’ on retirement and life goals.
Mr C Comments
“We’re all very happy indeed.”
Pension Decoder & Retirement Income Specialist – Nicola Downs
Pensions
Lifetime Allowance (LTA) and Tax Planning for Pensions
Pensions
Brian is a retired NHS doctor who’s various pensions grew to a point where they would exceed his Lifetime Allowance.
However, with careful planning he was able to avoid a 55% tax bill on the excess. This importance of this forward planning was highlighted again when he came across two other pensions he had forgotten about.
Watch Brian’s story now and if you are in a similar position you can call Trentham Invest Ltd on 01306 881999 for advice.
NHS Pensions and Pension Tax Planning for Doctors and other NHS Pension Members
Pensions
Retired GP, Brian had an NHS pension that almost overnight increased in value so much that he would have faced a 55% tax bill on his pension holding above the £1.5 million Lifetime Allowance (LTA). Then, just a few months ago Brian discovered he had two other personal pensions that would have meant an even higher tax bill.
Well versed in the peculiarities of NHS pensions, his Financial Planner, Nicola Downs of Trentham Invest had taken precautions to ensure he was not hit by these ‘tax bullets’. See his story in this video.
Mr O Comments
“It would have been relatively simple to move my funds out of Equitable Life myself: it would also have been very costly indeed, as there is no way I could have been aware of the sequence of transactions necessary to optimise my outcome. Furthermore, the sheer complexity and volume of the paperwork involved, all of which had to be submitted in exactly the right order, meant that the process could never realistically have been implemented by anyone who wasn’t a specialist in the field. Trentham Invest were very efficient and professional, while simultaneously friendly and approachable. They went to great pains to explain each step of the process they mapped out so I had a clear understanding of the sequence of events and the (relatively short) timescales involved. All leading to a very satisfactory outcome.”