Planning for Retirement

In this case study we show how we helped our client simplify his numerous pension arrangements into one simple scheme. This allowed him to take benefits more flexibly as he reduces his working hours and gradually retires.

Self-employed, with a number of pensions

Spencer is 65 and lives in Worthing with his wife.  He is a self-employed carpenter. Spencer came in to see one of our retirement specialists in Worthing as he plans to retire shortly. Over the years he has managed to accumulate five different pensions from various jobs. He wanted to review these with the view to simplifying them if possible.  Spencer wanted to take his tax free cash (Now officially called a Pension Commencement Lump Sum) and then gradually reduce his hours. Spencer would like to supplement his income by drawing from his pension. He plans to fully retire at 70.

Spencer has some money in some collective investments and a cash reserve to pay for any unexpected expenses. After meeting with Spencer and discussing risk, we established that Spencer had a medium high attitude to investment risk.

Reviewing the existing pensions

We got authority from Spencer to speak to his existing pension providers. We discovered that most of the schemes were fairly standard offering basic benefits at retirement. In order to take the retirement benefits, you had to purchase an annuity with all of the existing plans. Spencer did not want to take an annuity as he wanted to take his income more flexibly as he gradually reduced his hours.

Guaranteed Annuity Rates

During our research we discovered that one of Spencer’s plan had a guaranteed annuity rate. These are annuities which can offer a return twice as high as those offered in the market place today. So rather than paying an annuity with a return of around 5% Spencer’s plan offered a return of 11%. We recommended Spencer take the annuity rate with this particular provider as it was so generous. This gave him a fixed income each month which would begin supplementing his reducing self-employed income.

Spencer’s remaining pensions

As Spencer wanted to take a flexible income, we recommended he transfer his remaining pensions into a new scheme which offered Flexi-access drawdown. This allowed Spencer to take his tax free cash from his remaining four pots. Part of the tax free cash will be used for Spencer and his wife to go on a big holiday next year. Spencer has decided to use the rest of his tax free cash to utilise his Stocks and Shares ISA Allowance over the next few years and we helped Spencer with this. The account we set up for him for his pension allows Spencer to hold ISAs also. This means all of Spencer’s new pension and ISA’s are held in one place making it easier to check the value and also results in less paperwork which Spencer was pleased with. Spencer can leave his ISAs invested indefinitely or draw a tax free income from the ISAs to supplement his pension income.

Please note the above case study is based on a real client seen by our advisers, however all names have been changed for confidentiality. This case study forms a summary of advice and before taking out such products we recommend taking independent financial advice as everyone’s situations are different.


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