Alternative Income Strategy

We were introduced to a client who had not been receiving regular reviews of his Pension Income drawdown arrangement.

He was concerned about the performance of his funds and he had a need for more income. He had been told that as he was drawing the maximum he could not have any further, so was considering using his personal cash reserve to provide top ups,much against his wishes as he wanted to retain this money as a rainy day fund.

Following discussions it transpired that the client had annual State and a small Occupational Final Salary pension which together provided him with £14,500 pa. In his personal pension drawdown fund he had in excess of £325,000.

We advised client to consider Flexible Drawdown by using some of his personal pension fund to purchase a secure lifetime annuity of £5,500, sufficient to bring his total secure income to £20,000 including his state and occupational pension. This would then allow him to take much higher unlimited amounts from his remaining pension fund to meet any additional income he needed.

His cash reserve fund has been retained and is available to him in the future if needed and his pension fund now receives quarterly investment reviews to monitor performance to see if it continues to meet expectations. Client has more control and flexibility over his current and future income needs.

Flexible Retirement Planning

A business couple in their late fifties had a need for capital to assist their son in the purchase of a property.

Although they had some cash and a share portfolio,they did not want to disturb these as their existing cash was needed both personally and within their business and their shares would trigger a capital gain if sold,therefore they needed advice on the options available to them.

Following a full review we discovered that they had personal pension funds which jointly were valued at £360,000. As they were both over age 55, we advised them to move funds into a drawdown arrangement and take the maximum tax free lump sums (25% of fund value, £90,000), this released sufficient capital to assist with house purchase.

As the  clients were still working and in receipt of salaries as directors of their own company,they had no need of further income. However we advised them to take the maximum pension allowable and recycle this as a pension contribution, therefore allowing them to reclaim tax at their highest rate on this contribution. The additional pension contributions, funded by the income withdrawals, now went into a fund from which they could take further tax free cash withdrawals in the future and should either of them die before age 75, the whole of the fund in the new plan would be available to the surviving spouse free of all taxes, thus creating a much more tax effective tax planning strategy, whilst safeguarding their financial security.

Leaving a Legacy

Clients referred to us by their Solicitor were concerned about their IHT liability. Following a full review of clients assets, liabilities, income and capital needs, it was apparent that they had a substantial IHT liability in the region of £400,000.

Whilst they were keen to mitigate this burden from their estate they were not in a position to gift away sufficient assets,as they had a need to generate income for both the short and long term and both clients were in good health for their ages. We took into account the clients requirement for a reasonably simple solution, which would allow them to maintain control and access to the majority of their liquid assets for their current and future income and capital needs. However they were keen to reduce the IHT burden for their ultimate beneficiaries.

Having considered and discussed a number of different trust and gift based options, we recommended a simple solution to place a single premium joint life last survivor whole of life plan in trust to their beneficiaries,with a sum assured sufficient to meet the IHT liability. The clients did have the spare capital required to fund the premium, leaving their other assets free and available for their personal use.

The plan in trust would be paid free of tax and speedily, without the need of probate and be sufficient to fund the IHT bill, leaving the remainder of the estate intact for the family.

Clients therefore retained control over their estate and access to their portfolio for their own use, secure in the knowledge that they had dealt with the substantial IHT issue and protected their estate for their beneficiaries.

Creating Peace of Mind

An existing client introduced me to their friends, a retired couple, who were tired and frustrated with the paperwork and endless administration of their investment portfolio, which had been accumulated over many years. It included Isa’s, PEP’s Unit Trusts and Shares, all with different providers and fund managers. Also they were not benefiting from regular reviews, did not have a clear investment strategy and were concerned with the potential risks to their investments from both the stock market and inflation.

We commenced a full review of their situation, including their income and capital requirements, established their priorities and discussed their long term objectives. We also discussed and considered the risk capacity of the clients together with the risk required to generate the returns needed to meet their objectives.

We then created and implemented a strategy which was not designed to achieve the highest returns possible, but to generate the returns the clients specifically need to maintain their lifestyle with the least risk to their capital.

Following our review we were able to;

  • Reduce their paperwork to a minimum by consolidating their portfolio and provide six monthly reviews and valuations all in one single report.
  • Provide access to the whole of the investment market and all leading fund management groups.
  • Create a clear, relevant investment strategy and plan,unique to the clients spcific needs. The regular reviews and ongoing monitoring of the portfolio provides them with simplification and peace of mind.