Case Studies And Final Salary Pension Transfer Examples

write-593333_1920

 Final Salary Pension Transfer Examples.

Case Study #1

Mr W worked for one of the major high street Banks for 25 years leaving service in 2005. He is approaching 55 and wondered what options were open to him and if he could take advantage of the flexible benefits pension regime introduced in April 2015.

Mr W had requested a transfer value in May 2016. The transfer value at that time was £750,000. The Bank recalculated the transfer value in August 2016 and it increased to over £870,000 and finally in September Mr W was contacted again with an increased transfer value of in excess of £950,000.

The maximum tax free cash available from the scheme was £98,452 with a reduced pension of £15,153 p.a. This represented in excess of 60 years worth of starting income offered by the scheme. Setting aside any annual increases to the scheme (or growth within a new pension arrangement) Mr W would need to live past 100 before the income he receives will match the transfer value.

Mr W now has access to almost £240,000 of tax free cash and the return required to match the starting pension from the scheme is less than 2% p.a. His wife will have access to the residual value of the fund should Mr W pre-decease her. It is their intention to preserve the value of the fund throughout their lifetime and pass it to their children Inheritance Tax Free.

 

Case Study #2

Mr Y aged 56 contacted us in September 2016 for advice in relation to his Chemical company pension scheme. He had a guaranteed pension of £24,000 at age 62 and an early retirement illustration with the option of taking a pension now of £20,000 or Tax Free Cash of £106,271 and a reduced pension of £16,153.

The transfer value offered by the scheme was in excess of £900,000.

Mr Y decided to transfer his benefits into a personal pension. His tax free cash entitlement is approximately £230,000 however he elected to to take only 5% of the fund to repay his outstanding mortgage. This leaves the balance of his tax free cash to be taken at a later date.

Mr Y decided not to take income from his pension at this time but is considering approaching his employer about reducing his hours of work. He will then access his pension flexibly to top up his income.

This transfer represented particularly good value because it significantly increased the Tax Free lump sum available to Mr Y

The transfer value represented 45 times the amount of (initial) pension income on offer or 50 times the reduced pension income after taking the tax free cash offered by the scheme.

Mr Y’s spouse will have access to the residual value of the whole fund should he predecease her. They thought this was a significant improvement on the death benefits that she would be offered to her by the scheme of £10,000 p.a.

 

Case Study #3

Miss X aged 55 contacted us in August 2016 for advice in relation to her Chemical company final salary pension scheme. Miss X had not worked for a number of years and lived on income from her savings and investments. As she had attained age 55 she had applied to her previous employer  for an immediate pension. The scheme offered a full pension of £15,018 p.a. or a tax free cash lump sum of £89,140 and a reduced pension of £12,794 p.a.

The transfer value offered by the scheme was in excess of £550,000. The transfer value represented approximately 37 times the income offered by the scheme.

Miss X has no dependents and one of her primary concerns was to secure the transfer value as a benefit for her family, in particular her nephew and niece when she dies. She was also keen to access the maximum tax free cash available from her pension.

Miss X decided to transfer her benefits, as a consequence she increased the tax free cash available by over £50,000 and secured the residual value of the fund for her nominated beneficiaries.

Although Miss X did not require any income at this time, the return required to match the starting income from the scheme after taking maximum tax free cash was just 3% p.a.