As Mr. Smith approached retirement, he began to reflect on his pension and its implications for his family’s future. Throughout his career, he had been content with ensuring a secure pension. However, it wasn’t until his later years that he truly considered what would happen to his pension and loved ones should he pass away prematurely.
Mr. Smith had been part of his previous company’s Final Salary pension scheme, which offered a non-contributory arrangement. This meant he hadn’t contributed to his pension fund directly, but his retirement income was calculated on a 1/60th accrual rate. After 25 years with the company, his salary upon departure was £75,000, securing him an annual pension income of £31,250 when he reached 65.
When Mr. Smith requested a Cash Equivalent Transfer Value (CETV), he was taken aback to learn that his company was offering him £1m to transfer his pension. The generous offer, which multiplied his pension by 32, was within the Lifetime Allowance limits. Given the substantial value of this transfer, Mr. Smith was eager to explore whether staying in the scheme or transferring to another option was best for his future.
A major concern for Mr. Smith was ensuring his family’s financial security if something were to happen to him. Under the scheme’s rules, his wife would receive 50% of his pension income in the event of his death, which equated to £15,625 annually. However, the scheme didn’t provide any provisions for his children, leaving them without a financial safety net.
Mr. Smith’s desire to protect his family prompted him to explore options that would allow his children to benefit from his pension after his death. Following changes to UK pension legislation in 2015, leaving pension funds to family members became more complex, with tax implications depending on the age of the pension holder at death.
Ultimately, Mr. Smith’s solution was to transfer his Final Salary pension into a Self-Invested Personal Pension (SIPP). This move provided him with greater flexibility, allowing him to control the timing and amount of his pension withdrawals. More importantly, it ensured that his entire pension fund would be passed on to his wife and children, offering him the peace of mind he needed as he entered retirement.
While transferring to a SIPP meant relinquishing the guaranteed income from his previous employer, the ability to leave his pension to his family was invaluable. This decision brought Mr. Smith a sense of security and reassurance, knowing his loved ones would be provided for no matter what the future held.
Mr. Smith’s experience highlights the importance of seeking expert guidance when navigating complex retirement decisions. Neba Private Clients provided him with the insights and options that allowed him to make an informed choice, ensuring his family’s financial wellbeing for years to come.
TEAM plc (LON:TEAM) is building a new wealth, asset management and complementary financial services group. With a focus on the UK, Crown Dependencies and International Finance Centres, the strategy is to build local businesses of scale around TEAM’s core skill of providing investment management services.
