Overview
Jas (age 61) was the second largest Shareholder in a successful business with 20 employees, before selling his shares to retire with his wife Ravinder, who was a year younger. Over the years, Jas had built up a pension fund of around £600,000 within the company’s Group Pension scheme and the sale of his company shares would result in him receiving around £400,000 after tax.
Their main concern
They were both already receiving a pension income from old ‘Final Salary’ pensions; however, their State Pensions wouldn’t be payable another 5-6 years and therefore they needed an additional £7,500 per year of net income until then to cover their usual annual expenditure.
Jas was concerned whether his pension funds were invested appropriately and asked us to advise him. They were also looking for investment advice, as they acknowledged that they held too much cash and wanted the potential for their savings to grow faster than inflation. Tax efficiency of their financial affairs was important to them.
Our main advice
- As Jas was liable to Higher Rate Income Tax in the year of his retirement, we recommended they spend some of their cash to cover their income needs until the end of the tax-year.
- We consolidated Jas’ remaining pension funds in a way that would give him maximum flexibility as to what regular income and lump sums he drew each year and ensured that his pension income was as tax efficient as possible.
- We also recommended a suitable mix of assets to ensure his pension funds had the potential to grow faster than inflation, but within the level of risk he was happy to take. In reality, he didn’t need to take much investment risk at all to achieve his objectives.
- We recommended a new investment portfolio with half of their cash, invested for growth initially, investing into a suitable mix of ‘growth’ and defensive’ assets to match their attitudes to investment risk and timescale.
What we did
- Arranged a new pension plan for Jas, consolidating his existing plans into a lower cost pension plan and ensuring he had the maximum flexibility as to how he accesses his funds.
- We recommended a consistent investment strategy for Jas’ pension funds, with a suitable level of risk, taking into account his investment timescale and objectives.
- Arranged a new investment portfolio via an Investment Platform, to simplify the administration and reduce costs for the initial investments and any changes we would recommend in the future.
- We recommended a diverse portfolio, to spread the risk, using a number of ‘preferred funds’ for the asset types recommended.
- We produce twice-yearly reports and hold twice-yearly review meetings with Jas and Ravinder to look at the performance of their investments, Jas’ pension fund, and recommend any changes we feel would benefit their portfolio. We also review their income needs and advise them where to draw capital from for maximum tax efficiency and to meet their overall objectives.
- We automatically use their ISA allowances each tax-year from their existing investment portfolio, to ensure their portfolio is as tax efficient as possible.
What were the benefits
- Arranging a new pension plan for Jas saved him around £1,000 per year in plan charges.
- Jas and Ravinder have the peace of mind of knowing that their retirement is benefiting from a structured approach to the investment of their personal capital and Jas’ pension fund, which are invested in line with their own objectives and timescales and within defined risk parameters.
- Our ongoing advice and reviews mean that any changes to their circumstances, objectives, attitude to investment risk or the economic outlook are considered and changes to the investments and pension fund are made when appropriate.
