Trentham Invest Ltd - Case Study

Locked into your pension? There really is another way out

Annuity rates within ABC Pension AVC are 3.1% of capital. With a fund value of £800,000 this is low (£24,800 gross pa).
In the event of his death, the capital sum is lost through annuity and the income to his spouse would halve (£12,400 gross pa). This represents 1.6% of the original capital value.
Having worked long and hard since 1979 the last thing he wanted was for all his money to be lost out of the estate.

To maximise income and guarantee it as much as possible.
To have more control over leaving a legacy for his wife and children.
To have more control over the rules of his estate as opposed to someone else setting the rules.
A lump sum to pay off the mortgage of £260,000.
An income of £4,000 net per month (£48,000 net pa/£80,000 gross pa).
To avoid paying pension tax charges.

Taking monies from the ABC Final Salary Scheme plus the AVC would give an income of £44,375 gross pa. This is 55% of what he required. We changed this and gave him a facility to take up to £89,500 gross pa.
Taking a lump sum from the ABC Final Salary Scheme plus the AVC would give an amount of £351,759. We gave him an amount of £436,189; an extra £84,430 to pay off his mortgage and buy his wife another horse!
If he was to die, and assuming tax free cash had already been taken, his wife would receive a total amount of c£20,000. We have been able to ensure that in the event of his death his wife would receive £850,000. If we were to add to this the tax free cash of £436,189 already paid this would give a total of £1.28 million preserved in the estate. If this £850,000 were to be invested at 3% gross this would give an income of £25,500 gross pa but the most important outcome is that the wife has choices and as the money is in the estate it can be passed to the children as a legacy.
We saved him £95,000 in pension tax charges and added £386,000 to his estate free of inheritance tax to the children.
We designed a portfolio where performance over 3 months is 0.64%, over 6 months is -4.19% and over 1 year is -1.74%. This compares favourably to the FTSE All Share performance over 3 months of -9.71%, over 6 months -34.56% and over 1 year of -35.78% leaving him able to sleep at night!