Ian – World Leading Food and Drink Company
What conversation did you have with Charlie last year?
I had a conversation with Charlie regarding the process of converting my Final Salary pension into Drawdown in order to give me the option of early retirement. His view was that this appeared to be do-able and that we should go ahead with getting the relevant details from JLT. After this process had started, Charlie contacted me to say that he had received new guidelines from StJP that he should not support such activity with somebody whose only pension was involved. He explained that he had discussed my case with another IFA who specialized in such activity and who would be happy to look at my case. He gave me your contact details.
What was the problem you were trying to resolve?
Having turned 55, I decided to investigate my options for early retirement. I quickly ascertained that taking my Final Salary solution early, was not a viable option. Having attended a JLT/Pepsico pension forum it became apparent that moving my pot to a drawdown account possibly presented a more viable opportunity.
What has the journey been like for you?
Somewhat frustrating. This has partly been because the process has been a little slow in terms of getting numbers etc from JLT but also because I didn’t understand the process steps upfront. Something along the lines of your other ‘aide memoirs’ would have been brilliant at the start of the process. The most obvious example was that it wasn’t apparent to me that I must leave the pension scheme in order to get a final CETV.
The biggest challenge was in not knowing what questions to ask.
What have you relied on me for?
The whole process from ‘Is this viable?’ and ‘How do we make it happen?’ to Investment Advice and the mechanics of setting up a Personal Pension account.
Although I’m more of a ‘face to face’ fan, the process of doing most of this by phone and e-mail has been fine. I’m also a fan of straight talking and being able to ask stupid questions.
How does your future look now compared to a year ago?
Whilst the future never looked particularly bleak, I now feel that I have more options and that they are in my control. Bright but also slightly scary.
Ian’s health has suffered with arthritis and has resulted in hip replacements. His mobility is restricted and this has focussed his mind on the years left to be able to enjoy his life. He is now 56 and has 9 years left before his retirement date with his company and before he reaches the pension scheme normal retirement date.
In November 2016, Ian spoke to a friend, who is a financial adviser. He asked him how he can access his pension assets early; particularly after the change in legislation April 2015, where news has published the ability to access pension monies and ‘buy a Lamborghini’. Whilst it was possible to get at the monies, this was a specialist area. Between them they had gained a cash equivalent transfer value of £480,000. Ian had completed some initial calculations himself, but had no idea how to get his hands on the actual monies. Ian’s friend was soon tied up in knots; unable to cut his way through the legal complexities. Instead, Ian he recommended him to a business colleague, Nicola Downs, a final salary pension expert.
What we did
We agreed with Ian to follow three strategies to give him the confidence to make the best possible decisions for his financial future:
- Determine the current membership status of his pension entitlements
- Determine his options of staying in the scheme/getting out of the arrangements and comparing the benefits of short term gain versus long term loss
- A plan to get out of the scheme, gain a guaranteed transfer value, establish the usefulness of that to him, maximize the benefits of the monies and clearing a pathway forward to allow Ian to leave his current work and enjoy life with his health as it is.
With the existing scheme membership and rules to dissect, Ian’s age, the wider UK pension legislation to navigate, this was a considerable challenge.
We set out the pathway and put the plan into plain English.
- The headline review of the estimated CETV showed that the total pension accrued was £20,051 per annum. Ian could comfortably enjoy life with this level of income.
- If he took the pension early from the scheme, they would only give him £13,808 per annum. This was a big drop in income and lifestyle for Ian.
- At 65 he would get £27,085 per annum. Whilst this was more than his needs, he didn’t/couldn’t wait another 9 years.
- The estimated transfer value would give Ian a pension of £19,200 per annum. This would make his life dreams come true.
- To get a guaranteed transfer value, he had to opt out and leave membership of the company scheme. What we then found out was that he could join a second type of pension in its place.
- We then requested a guaranteed transfer value, which came in 1st August 2017 for the sum of £521,351. This would give him an expected pension of £20,800 per annum.
- If he took the early retirement option he would get £13,572 per annum.
- The income we projected was based on a 4% draw rate. However, Ian has the flexibility to take as much or as little as he wishes to suit his life.
- We designed a low risk portfolio, and showed him how sustainable 4% has been over the past decade for our other clients who are living off their finite wealth.
- The CETV will be moved to a pension in his own name that he can access on line, where we will provide support and advice to the investments, and help him repay a mortgage debt by January 2018.
- Once the monies have been issued by cheque/bank transfer to his personal account, he can confidently serve his 3 month notice to his employer.
- If he doesn’t spend all the money, then his unspent money can be left to his nephews.
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.