Mr P – International Marketing Services
Mr P is looking forward to retiring at age 60. He is currently age 55. Whilst he has his own business, he also has a St Ives Pension as a Final Salary deferred beneficiary with a normal retirement age of 65. Mr P left service on 7th June 2002.
The financial climate has changed dramatically over the last ten months which has compelled Mr P to look in to a transfer value; if the transfer value has increased significantly, as the market has indicated it may have, then it would be a great financial benefit to Mr P’s retirement plan to transfer the capital out in to an alternative pension arrangement whilst the transfer value is high. Mr P feels if he were to wait, he will miss out on a significant opportunity to add to his pension wealth and future legacy for his family; he has a wife, a son and a daughter.
Mr P’s main issue is he wants to be able to see the effect of taking the transfer value of £270,666.05 when put in context against all of his and his wife’s financial resources. Trentham Invest Limited has included detailed analysis and projections to enable Mr P to make a thoroughly informed decision.
What we did
We asked the St Ives Group 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 projection of benefits to age 60, which is his intended retirement age, not 65. This assumed Mr P retains the pension in the St Ives arrangement. The projections included all other financial resources including his wife’s financial resources.
We then presented the consequences of taking the CETV on offer and the results of that decision and then compared them to staying in the scheme.
The CETV received, as at April 2016, is £270,666.05.
Mr P left service on 7th June 2002. The deferred pension benefits at that time were £10,525.08 per annum. Mr P’s total pension has been revalued to £15,708.35 per annum.
The scheme normal retirement date is 08.09.2025 when he will be age 65.
In the event of Mr P’s death in the scheme, 50% of the pension will be payable to Mrs P as opposed to 100% of the pension if he transferred out.
- A total of £270,666.05 is added to Mr P’s personal pension fund value.
- At age 65 (Normal Retirement Date), Mr P’s full pension from St Ives is £21,475 per annum compared to £13,159 per annum if he transferred to a personal pension.
- The CETV has been reduced by £28,230 due to insufficient funding.
- If the scheme went to the PPF, and was accepted, he would get £14,137 per annum.
- If the scheme went to the PPF, and was rejected, he would get £8,011 per annum.
- In the event of his death, his wife would get 50% of the pension. If he took the transfer value, the death benefits become much greater; the whole fund is paid to his wife.
- On Mr P’s death 100% of the CETV (valued at £270,666.05 in April 2016) will be left to his wife and children opposed to a reduced annual pension income for his wife of £10,737 per annum. His children will receive zero.
- By transferring the CETV Mr P has access to c£82,000 tax free cash at age 60.
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.