John and Sarah have been clients for many years. Sarah is 63, retired and receives a final salary pension. John is aged 61 and working full time. They enjoy sailing and regular holidays. The couple have two daughters in their 20's that are just starting their careers and John & Sarah would like to support them where possible.
Cash & Investments: £115,000
Pension funds: £120,000
Other Pensions: John had a deferred final salary pension which is payable at age 65
John is really looking forward to retirement and plans to finish work before 65 if he can. He's not sure how he can do this without drawing on his pensions too early or using up their capital.
Their current income provides them a comfortable lifestyle now and this will have to reduce if John stops work.
- John wants to retire so they can spend more time on travel and his hobbies.
- If John continues to work until 65 they would be financially secure in retirement, so they had to find ways to fund the next 4 years.
- John could start drawing his deferred Pension 4 years early, but will incur heavy penalties
- He is uncertain if his old company pension is secure enough to risk leaving it.
- John’s personal pension is still exposed to some market risk, and does not offer much flexibility in drawing benefits.
- They want to continue to support their daughters if needed.
Actions we took
We spent time discussing their goals to establish a true lifestyle expenditure over the next 5 years.
We created a Financial Plan and Cashflow forecast demonstrating the impact of John finishing work now.
This included investigating the options of:
- Drawing his deferred pension early
- Drawing from his personal pension fund
- Using existing capital to support them
- Just reducing John's working hours
We established that drawing from his personal pension fund was the most suitable option. We achieved this by moving it into a scheme that allowed greater flexibility to start a tax efficient income stream.
We also created a suitable portfolio structure that could maintain the required income and achieve capital growth
This resulted in:
- John being able to hand in his notice and retire immediately.
- John and Sarah knowing that they can go on the holidays they want over the next few years - and beyond!
- They did not have to use any capital, which meant they can still support their daughters if they needed help
- John being a non-taxpayer for the next 4 years.
Where are they now?
It is now 5 years since we put these plans in motion, and we have continued to monitor their financial plan and make adjustments where needed.
Although John has drawn funds from his personal pension, it has maintained its capital value and is still able to provide adequate income in addition to his state and final salary pensions.
They have been enjoying their holidays each year and been able to support their daughters financially. They now have a healthy, secure income for retirement and can continue to enjoy they lifestyle they desire.
And Panthera could do the same for you – call us on 023 9226 8969 to discuss your particular requirements.
Names have been changed.
A pension is a long term investment. The fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation. The tax treatment is depenent on individual circumstance and may be subject to change in the future. Tax Planning is not regulated by the Financial Conduct Authority.