by Mike LeGassick, Independent Financial Adviser with Manning and Company
Julie*
from Plymouth worked hard as a social care worker. She also planned for the future, putting
money away faithfully into her Final Salary pension scheme. She could expect a comfortable retirement.
But
there was a problem. Julie had a health
scare, which prompted her to think: what if retirement never comes...?
Divorced,
and with an adult daughter, Julie had no dependents. If Julie died before retirement, her pension savings
– worth £176,000 – would be mostly wiped out.
Her daughter would only receive ‘return of contributions’ plus interest,
totalling about £32,000.
Julie
decided her priority was to ensure her daughter inherited. After looking carefully at the pros and cons,
she opted to come out of the pension scheme and take the cash equivalent lump
sum.
Giving
up a Final Salary pension scheme should not be undertaken lightly. It offers good retirement payments, which
stay in place until you die; although the death benefits are not so good. Julie only did this after careful thought,
and many conversations with me.
Julie
was able to clear off her mortgage, and saves the monthly payments. All her money is under her control. She can still invest for her future, knowing
her daughter will not lose out. Taking
these steps has safeguarded £144,000!
Taking
professional advice, understanding the pension rules and thinking laterally
made a huge difference to this family.
Next
year, changes in the pension rules mean people aged 55+ will have greater
freedom in using their pension savings. And
the abolition of the 55% ‘death tax’, charged when inheriting a pension from
someone age 75+, will make pensions a more interesting vehicle for saving and
passing on an inheritance (although some lower rates taxes may still apply).
Speak
to me, and I can help you explore how to make the most of your pension, and
secure your and your family’s future.
* real client, name changed
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