Robert – Information Technology Services – Serious Illness
“I contacted Trentham Invest because I was worried about what my wife would receive from my pension if I died. This had been playing on my mind since I was diagnosed with Parkinson’s disease. I knew that I could transfer out and had even asked for a transfer value but was afraid if the investing was left up to me I would make a ‘cod’ of it.
Thankfully, the advice Nicola gave me laid to rest all my fears. What’s really important to me now is that I know what to do going forward. Next year I’ll be using some of my pension fund to clear my credit cards and a huge chunk of my mortgage. That will make me feel even better.”
Robert, a 54 year old former HR director with a European ICT Services company, had stopped working due to the onset of Parkinson’s disease. He was being paid £3,581 per month net via the company’s permanent health insurance scheme (PHI). The company had closed their final salary pension scheme earlier in the year and Robert was worried about the future financial health of the company and what his wife Mary would receive in the event of his death. He had a large mortgage and substantial credit card debts.
If the company pension fund applied to the Pension Protection Fund (PPF) Robert’s pension benefits of c. £58,000 per annum would be halved. Mary’s death benefits would also be reduced. However, he was also apprehensive of managing the investment if he transferred out of the scheme.
Robert wanted to know whether he should stay in the scheme until the normal retirement date (NRD), should he take early retirement, or should he transfer out of the scheme.
What we did
We analysed Robert’s options, explained the risks and showed him the benefits he would receive. As with all clients, we also showed him how each option would differ in the event of his death. We then recommended the option that would most suit his circumstances.
- He wanted to take early retirement benefits to ‘secure his pension from the PPF’. This would have created 2 problems:1. He would lose his PHI payments. This would be replacing ‘Peter’ (PHI) with ‘Paul’ (early retirement). There was no benefit in doing this.
2. His early retirement pension would still be exposed to the PPF.
- Moving the pension money into his control did 5 things:1. It did not affect his PHI (Peter) income.
2. It gave him more control.
3. It gave him access to a one off lump sum of £196,611 to repay credit cards and mortgage.
4. It significantly improved his personal cash flow.
5. Mary now gets either £37,000 per annum income or a £393,000 lump sum after the mortgage is paid, whereas before she would get just £25,650 pa and would still have the mortgage and credit cards to pay.
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.