Robert – Life Insurance Company
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.
What we did
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.
- 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.