Mr W – Multinational Defence, Security and Aerospace Industry
It has been a great relief to find in Nicola someone who understands and can guide us through the financial minefield that confronts us. She is an authentic expert in her subject, who exudes passion and empathy, whilst working with great skill and precision. We have placed our complete trust in Nicola as our partner in our financial future. We feel very comfortable with that decision.”
Mr W is 59 years old. He is married with three children. Mr W has a mortgage of £400,000; his property is currently worth £730,000. One of his short term goals is to buy a new family home. Whilst Mr W is currently a Director at GE and is an active member of their final salary pension scheme, he also has twenty years of pension with BAE Systems Executive Pension Scheme. With two final salary pensions to consider as well as retirement being only three years away, Mr W contacted Trentham Invest in order to explore the options available to him in order to maximise his legacy for his wife and his children. How would he go about navigating through all the rules and legislation in such a short timescales?
Mr W’s initial goals seemed straightforward and achievable:
- Lifetime Allowance: what do you do about that?
- The BAE Cash Equivalent Transfer Value: what can you do with that?
- Pay off your mortgage; £400,000 outstanding
- Take money from the pension pot to pay off the mortgage
- He does not need any further income from the pension pot
- Preserve the pension pot for five to six years
- Stay in the pension as an active member?
- Find an inheritance friendly scheme so that Mrs W would get the whole pension if Mr W predeceased her;
- To have something left over to pass to family when both Mr and Mrs W have deceased.
Mr W had recently been thinking about transferring out of the company scheme. He has done some research into transferring out however he wished someone to provide him with thorough and robust advice that would help him to know what is best for him to do; to provide him with the thorough level of understanding that he needed in order for him to make the decisions he needed to for his and his family’s future.
What we did
Mr W was due to receive a CETV from BAE Systems pension in December 2015. At this point we used our methodology to give a headline view of the key data.
We asked the BAE Systems scheme many questions, deciphered the information, translated the complexity of his situation and organised the information in a clear way to understand. We pointed out the boundaries of what he could do, and what he could not.
We clearly presented the information to show the benefits of prioritising the Lifetime Allowance issue versus leaving it until after making the decision to transfer out of his final salary scheme and the associated risks of those decisions both now and in the future.
We also presented the information to show the consequences of staying in the final salary scheme to age 62, taking early retirement at 59, the risks of those decisions both now and in the future.
We presented the consequences of taking the CETV on offer and the results of that decision and then compared them to staying in the scheme.
- By transferring out, the pension at 65 is expected to be £83,200 per annum versus a pension of £89,000 per annum
- In the event of Mr W death, Mrs W and their 3 children are expected to get £2,081,376 versus £44,500 per annum for Mrs W and nothing for the children
- If Mrs W dies, the children will get c£2m versus nothing from the BAE scheme.
- Protected against the scheme going to the PPF where the pension would drop to between £27,543 or £50,080 per annum
- Mr W is now in control of his entire pension estate and its legacy. On Mr W’s death the whole of his pension (current value £1.8M) will be left to his wife opposed to Mrs W receiving £30,000 per annum if Mr W had left his BAE pension where it was.
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.