Roger Jones

Roger and his wife are in poor health. Roger has recently undergone the process of transferring his pension out of a defined benefit scheme to safeguard the potential to pass on value to his children on death.

He has recently taken early redundancy and been living on cash savings rather than drawing on his pension whilst he assesses what his and his wife’s actual expenditure levels are.  He has estimated this at £25,000 annually which leaves them with a shortfall of circa £10,000 per year over the next 9 years before their state pensions become available.

Whilst Roger appreciates that he may need to use his pension to live comfortably, he likes the idea of being able to pass on any residual value to his children when he dies.

"Knowing my decision-making has been based on a thorough process that has been stress-tested by i4C gives me and my wife so much peace of mind. "

What were the challenges?

Whilst Roger and his wife have established the level of expenditure to live the life he wants, he would like to look at drawing an income from his pension to plug the shortfall. This also enables him to maintain a level of cash for emergencies if needed.

Roger wanted to know how best to bridge this income gap whether it be:

  • Using a drawdown plan;
  • Taking tax free cash; or
  • From the purchase of an annuity.

Roger’s initial thought was to avoid purchasing an annuity due to the potential loss of value on death.

How did i4C solve their challenges?

The financial planner using i4C modelled Roger’s situation based on his current and future income and expenditure requirements.  This included establishing the income shortfall and the likelihood of Roger and his wife qualifying for an enhanced annuity due to ill health.

I4C was used to run several scenarios to compare the impact of taking income drawdown against buying an annuity with part of his available pension. It also considered what level of residual pension fund would be left on death to pass to their children.

What was the outcome?

Using i4C the financial planner was able to demonstrate to Roger that:

  • Purchasing an annuity ensured he could meet their income shortfall by guaranteeing a level of income for the remainder of their life; and
  • They could leave a residual fund not used to buy an annuity to grow pass on to their children during lifetime or on death.

i4C provided the planner and Roger and his wife with the confidence to take this route of action after considering various scenarios and considering many variables. The planner could run through these scenarios live in meetings as Roger’s thoughts developed.

Knowing my decision-making has been based on a really thorough process that has been stress-tested by i4C gives me and my wife so much peace of mind. We now know we have a plan in place that we do not need to worry about.”, Roger

"The complexity of tax calculations it performs relieves a huge amount of work from me and the outputs are displayed in a way that I can drill down into but remain simple on the surface for clients."

Steven Montague DipPFS EFA, Senior Paraplanner, Total Wealth Management

Read more