David M. – Major Plc in maritime industry
David, a 55 year old senior executive, came to us concerned about the value of his pension and AVC (additional voluntary contributionc).
At the time, his final salary pension scheme AVC paid 3.1% of fund value. With David’s fund valued at £800,000 this would generate a relatively low income of £24,800 gross pa.
Furthermore, in the event of his death the capital sum would be lost through annuity and the amount his wife would receive would halve to £12,400 gross pa. This represents just 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 from the estate.
What We did
Having previously experienced difficulty in dealing directly with the pension trustees, David was relieved that we would do all the necessary liaison to establish a transfer value.
Having analysed the cash equivalent transfer value (CETV) on offer along with the rest of his personal assets and family circumstances, it was crystal clear he should transfer out. We set up a new personal pension, executed the move and now manage his pension investments.
- David’s final salary pension plus the AVC would have given him an income of £44,375 gross pa. This is 55% of what he required. We were able to change this and gave him a facility to take up to £89,500 gross pa.
- Taking a lump sum from his final salary scheme plus the AVC would have given him £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 David were to die, and assuming tax free cash had already been taken, his wife would have received a total amount of about £20,000. We were 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. Most importantly, his wife would have choices and as the money would be in the estate it can be passed to the children as a legacy.
- We saved David £95,000 in pension tax charges and added £386,000 to his estate free of inheritance tax to the children.
- We designed a portfolio for him 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!
- Since starting to take his retirement income in May 2009, his capital/fund has not just retained its value, it has risen by £82,000.