Pension Case Studies

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Simon Lowndes - Financial Advisor
Simon Lowndes
Principal of LAD IFC Ltd

Pension Case Studies

Lowndes Alexander Daniel are authorised by the Financial Conduct Authority

Below are two pension case studies to show typical examples.

CASE STUDY ONE: KEITH AGE 55

£20,000 a year to retire, or £501,000 today? *

Keith is 55 from Manchester. He is struggling with his health due to working for many years in manufacturing and wants to retire now. Keith also has a family history of heart disease.

Keith wants the flexibility to take more now, and less in the future – something his scheme cannot offer. In also being conscious of his ill health, Keith is aware that his wife would only receive 50% of his scheme pension if he passes away.

Keith is also concerned that his employer has been recently taken over and that there are changes affecting the future security of the company.

Keith was offered a pension transfer value of £501,000 and chose to transfer to a personal pension.

 

WHY KEITH TOOK THE TRANSFER VALUE

Now his wife will receive the full remainder of his pension pot if he dies and he can retire today, taking a flexible income as he wishes. He is busy pursuing his hobby of course fishing and has noticed his health has markedly improved for finishing work as he anticipated it would. He has been able to take holidays as and when he and his wife wish.

 

*Based upon individual circumstances that may not apply in every situation.

CASE STUDY 2: MICHAEL AGE 56 *

£29,200 pension to retire or £618,000 today.

Michael aged 56 was offered a transfer value of £618,000 from his previous employer, a top 5 UK accountancy firm, in exchange for a projected pension of £34,700 p.a. at age 63, equivalent to £29,200 p.a. in today’s money. Michael was still working, had a mortgage still to repay and has two children, both out of college and working. Michael and his wife anticipated two reasonable inheritances from their respective parents. The transfer value here was 21 times the current value deferred pension.

WHY MICHAEL TOOK THE TRANSFER VALUE

  • Whilst Michael’s pension had generous annual increases, the transfer value was equally generous.
  • A 5% p.a. return net of fees on investment in a drawdown account would be able to match the scheme benefit to age 90.
  • Michael took the £154,500 tax free cash available from his transfer value and used it to pay down some loans, clear his mortgage and put £20,000 into ISAs.
  • He placed the balance of the transfer value with his existing pension drawdown worth £151,000 account leaving him with a combined drawdown account value of £615,000 from which he does not expect to have to draw income from for another 5-10 years.
  • The drawdown account is forecast to be able to generate sufficient income to take Michael a higher rate tax payer in retirement along with the state pension, whilst preserving capital for the children.

*Based upon individual circumstances that may not apply in every situation.

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