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Case Study (3)
Mr W is 65 and his wife is 62. He is overweight and suffering from raised BP and she smokes 30-40 a day and will not give up.
His pension fund was in the region of £350,000. They had completed a full budget and identified that as they needed £1,500 a month net income at all times they simply could not afford the risk of not having that income coming in.
Their combined State pensions were £700 pcm and he has a company pension of around £400 a month gross. They wanted maximum PCLS, (tax free cash) £87,500 to spend on holidays!
Their problem was that buying a joint life level annuity was expensive and if Mrs W passed on before Mr W (as is expected) buying her pension would have been a waste of money. If they both pass quite young then the family would simply lose the balance of £262,500.
We came up with a compromise solution.
To guarantee the income we purchased a joint life non-escalating protected 10 annuity on enhanced rates and then invested the remaining fund, around £120,000, in a Drawdown annuity with nil withdrawals initially. (A protected 10 year annuity guarantees that at least 10 years annuity payments are paid even if they should both passed on within the 10 year period).
They have their guaranteed income, can use the Drawdown fund to top-up their pensions if required. If he goes first Mrs W can continue Drawdown and vice-versa and should we lose them both, the family has the balance of any “protected” period and the Drawdown fund subject to taxation.
A win-win situation if ever we saw one!
His pension fund was in the region of £350,000. They had completed a full budget and identified that as they needed £1,500 a month net income at all times they simply could not afford the risk of not having that income coming in.
Their combined State pensions were £700 pcm and he has a company pension of around £400 a month gross. They wanted maximum PCLS, (tax free cash) £87,500 to spend on holidays!
Their problem was that buying a joint life level annuity was expensive and if Mrs W passed on before Mr W (as is expected) buying her pension would have been a waste of money. If they both pass quite young then the family would simply lose the balance of £262,500.
We came up with a compromise solution.
To guarantee the income we purchased a joint life non-
They have their guaranteed income, can use the Drawdown fund to top-
A win-
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