Case Study 4

Jodie is aged 60, has two sons and 1 daughter, divorced 5 years ago and is in good health

Jodie wishes to retire from her role with a local estate agents and expressed an income of £12,000 per annum is an amount that she could live on comfortably as an income. Her minimum income retirement per annum the she has calculated is £7,000 for all essential expenditure. Jodie would also like the maximum tax free cash payment available to make home modifications, supplement possible future holidays and weekends away as well with spending time with her dogs.

Jodie would like an element of guaranteed income but also some flexibility after taking her tax free cash sums.

She has several pensions which her Financial Advisor believes will provide her with an opportunity to meet her objectives for leading up to her state pension age (66) and then into retirement.

1)      She has a Defined Benefit Scheme/Final Salary Scheme that is offering a pension of £4,500 per annum if a pension commencement lump sum is paid (circa £30,000), also includes a spousal benefit, 5 year guarantee and increasing with the Consumer Prices Index. As Jodie is single/divorced her Advisor sees more benefit in her taking a level guaranteed pension rather than any benefit linked to inflation due to the risk of whether not ever matching or overtaking the level benefit, length of time it would take to do that and finally, a 5 year guarantee is not long enough considering her age and health when wanting to leave money to her beneficiaries.

2)      She has 2 pension schemes with ABC Life and Jones & Co with a combined value of £82,390 that are both Personal Pensions and no contributions being paid currently.

3)      She also has 4 pensions valued under £10,000 that her IFA advises her to take as small pots when required but kept in reserve currently.

4)      She also has a teacher’s pension that will be paying you £80 per month starting next month .

Strategy to meet objectives

Her advisor advised Jodie to transfer your Final Salary Scheme to Winter Pensions Company (highest annuity rate on open market) to purchase an annuity on the following basis – Maximum Tax Free Cash, Level payment, 15 year guarantee, single life and monthly in arrears which will provide her with a tax free sum of £36,300 and a guaranteed income for the rest of your life of £4,800 per annum. This will be more appropriate for you than the Final Salary pension and provide a higher level of pension and larger lump sum.

Secondly, Her advisor advised Jodie to consolidate the ABC Life and Jones & Co schemes into a flexi-access drawdown pension with Easy Pensions that will provide her with a fund value of £60,000 after taking her tax free lump sum (£20,600). Her advisor then advised Jodie to withdraw £10,000 per annum until age 66 when she is eligible to receive her state pension.

This strategy will provide Jodie with a total tax free cash payment of around £56,900 on day 1 but also provide her with an income of over £14,000 per annum until age 66. At this point Jodie’s state pension will start at £155 per week (£8,060 per annum) and her guaranteed income in total will be £13,820 (Annuity, State Pension and Teacher’s Pension), the remaining pensions small pots if left alone will then possibly be in a position to either produce a sufficient level of income or can be encashed and re-invested to provide an income from an investment vehicle to then make up the income shortfall.

The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.

Transferring out of a Final Salary scheme is unlikely to be in the best interests of most people.


Please note all case studies are fictional and for illustrative purposes only

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