Case Study:
School Fees Pension Plan:
The pension component of the plan would fund the mortgage and school fees
A small business owner with two children was facing projected school fees of £325,000.
The initial requirement was to make the payment of school fees manageable. Secondly, the client wanted to improve retirement income.
To achieve both seemed out of reach.
A consolidated school fees plan with a pension funded by the business was recommended, resulting in 47% tax relief on contributions and reducing both Income and Corporation Tax.
A new school fees mortgage became the vehicle for paying school fees, providing instant access to funds and solving any cash flow problems. The accrued pension lump sum would pay the school fees and any outstanding mortgage at a suitable future date, which also enabled school fees payment to be spread over a longer period.
Pension income can be balanced against affordability and payments adjusted depending on the pension performance and the future income situation.
A significant amount of Income Tax paid in the three previous years (and expected in the future) could be recovered by an investment scheme devised by our tax planning division
Existing investments with new savings were consolidated into a discretionary portfolio, providing a more appropriate and managed investment portfolio.
Additional life insurance, written in Trust, was also recommended.
The pension component of the plan would fund the mortgage and school fees, and an additional retirement income of approximately £45,000 per year (from a pension pot of £740,000) would be generated.
The investment plan recommended by the tax planning division was predicted to release approximately £100,000 tax-free profit by 2025.
The school fees pension plan described is very flexible. Pension income can be balanced against affordability and payments adjusted depending on the pension performance and the future income situation.
