Retired Doctor

Stephen – Retired Doctor Facing Life Time Allowance Threats

Client comments

“Nicola’s help has been invaluable. At a review meeting it came to light that I had two other pensions. I set Nicola off digging for information to unearth the details. Had we not taken her advice when we did we would have stumbled into a huge tax bill of about £139,000.”

Problem

Retired doctor, sixty nine year old Stephen, wanted to know what to do with his three non-NHS pensions. Each pension had various options so he sought advice from Trentham Invest to know which boxes to tick.

Already in receipt of £64,282 per annum from his NHS pension, it was critical he received expert advice on his Lifetime Allowance (LTA) if he was to avoid huge tax charges. Lifetime Allowance limits the value of benefits, whether lump sum or pension income, that can be paid out without triggering an extra tax charge.

What we did

Thanks to previous advice from Trentham Invest, Stephen already had Enhanced Protection and Primary Protection (dormant) which meant that with careful planning he could avoid the tax charge entirely. Also, applying for Flexible Drawdown (Stephen’s income was more than the minimum £20,000 per annum) our solution gives him the option of drawing as much or as little income as required from the entire pot, when he likes.

We reduced administration and improved control and risk management by consolidating the three pensions. We also set up a tracking system against Lifetime Allowance to make sure Stephen takes benefits if the LTA falls below £1.08 million, his LTA ceiling.

Measurable results

  • If Trentham Invest had undertaken no planning in terms of protection and certificates in 2007 and 2009, and Stephen had taken benefits in the tax year 12/13 the tax charge would have been £127,754.
  • Had he waited until the 13/14 tax year the tax charge would have been £139,262.
  • Stephen can now take £89,457 tax free cash.
  • Applying for flexible drawdown means that, with careful planning, all of the funds can be taken with an income tax charge of 40% versus a death benefit charge of 55%.

 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.