Case Study:
An Instant Pension:
Existing monthly savings plans and money allocated to pay fees would be diverted into a private pension, attracting 40% Income Tax relief.
A 53-year-old professional earning £155,000 gross per year. Their daughter was already attending an independent school. University provision was also a priority.
The estimated fees totalled £180,000.
The financial objectives were to :
- Fund the completion of the daughter’s education
- Reduce tax bills
- Build an adequate pension to retire at age 60
As the client was over 50, the recommendation was to pay the next school fee by investing into a pension and taking the 25% cash lump sum immediately.
As a higher rate tax payer, this produced a saving of 67% of the fee. Future school fees would be paid in a similar manner.
In total, the plan recommended was £45,000 cheaper than the client’s current arrangements.
Existing monthly savings plans and money allocated to pay fees would be diverted into a private pension, attracting 40% Income Tax relief.
Additional lump sums would be added to the pension fund at strategic points to make it possible to pay future school fees out of the tax-free lump sum, also attracting 40% tax relief.
The last two years of university fees would be paid out from some of the income generated from the pension.
In total, the plan recommended was £45,000 cheaper than the client’s current arrangements, and an additional pension pot of approximately £400,000 would be created.
