Case study – Retirement planning
Background
A client running a successful marketing agency was approaching his 60th birthday. Taylor Patterson had acted for the client for around 10 years. The main pension provision was by means of a well-funded SIPP. The client was happily married and intended to build on the success of his business for a further 5 years, using his SIPP as the main pension vehicle at age 65.
Challenges
Prior to establishing his own Company, our client had held a key position with a major advertising consultancy. The former employer provided a company pension scheme with generous contributions and a retirement age 60.
Successive reviews confirmed that the “old style” pension could not be considered for transfer to the SIPP because of the transfer penalties applying before the selected retirement age of 60. This was particularly frustrating as the fund choice was extremely limited.
Despite being a high earner, the client had a large mortgage which he took out as a means to start up his own business.
What Taylor Patterson did
Upon reaching age 60, the penalties attaching to the old scheme were removed. The client elected to take his maximum tax-free cash and used this to repay his mortgage. The remaining fund was transferred to his SIPP and ‘phased’ into the existing portfolio.
The Results
- The client’s outgoings were drastically reduced from income subject to higher rate tax.
- By electing to ‘phase’ the transferred cash into his portfolio, the client avoided the risk of fully committing his cash.
- Contributions can continue to be made to the non-crystallised element of his SIPP.
- There is no compulsion to take either Secured or Unsecured Pension from the transferred fund which can potentially benefit from further capital growth – and avoid any further income being subject to higher rate tax.
