John* approached us earlier this year as he wanted to consider his options regarding whether he should keep or transfer his Final Salary pension with Barclays.
Enhance Financial Planning researched and analysed all the appropriate options and advised that John transfer the pension allowing the withdrawal of a large tax free lump sum and giving enhanced death benefits for his family.
John is 49, married and has 2 financially dependent children. He is in good health and now works for himself.
John joined Barclays in 1989 and left in 2007 meaning he had accumulated 18 years’ service in the Barclays Pension Scheme.
John has a number of other pension arrangements having worked for a range of companies over the years.
John is fast approaching age 50, this has prompted him to review his personal finances and think about his long-term goals. During our discussions John revealed that he had always wanted to retire early and would love to be financially independent at age 60. He approached us to review his pension arrangements and asked us to put together a Financial Plan that would assess how realistic his goals were and what he needs to do now in order to achieve them. We discussed his goals and how much money he would need in retirement to live comfortably.
His main goals were:
- Retire early at age 60;
- Have access to the maximum possible tax free lump sum from his pensions; and
- Maximise pension death benefits so that his wife and children are well catered for in event of his death.
Once we had established John’s goals we approached his pension providers and requested information on his pension benefits.
Barclays provided us with the following information:
- Projected Income at age 60: Approximately £30,000
- In the event of his death: 50% Spouses income, on his wife’s death no further income
- Cash Equivalent Transfer Value*: £974,000
*A Cash Equivalent Transfer Value (CETV) is a lump sum that can be taken, if you agree to give up the guaranteed benefits within a scheme, and transfer to a new pension arrangement without guarantees. This transfer value equates to 31 times the income John could receive if he remained in the scheme.
- We also established that he would be able to take a larger tax free lump sum if he transferred.
We discussed with John the analysis of his pensions and how he may achieve his goals. Following our discussions John confirmed he wanted to transfer his benefits into a Personal Pension arrangement. He wanted to benefit from the potential:
- Higher tax free lump sum;
- Enhanced death benefits for his family; and
- Have the option to withdraw money from his pension early, without penalty, and exercise control and flexibility.
We transferred the benefits within John’s Barclays Pension to a Personal Pension and now manage the investment of his pension. A sensible investment strategy is in place which is monitored regularly. John now has flexibility over when and how he accesses his pension funds which will allow him to retire early.
Transferring from a Final Salary Pension is a very important decision and should not be taken lightly. It is vitally important that impartial financial advice is taken and all of the pros and cons are explored and considered in detail. Transferring from a Final Salary pension will not be appropriate for everyone. To discuss whether transferring may be the right choice for you please give us a call on 01543 546046 or email us on firstname.lastname@example.org.
*Published with permission. Name changed for confidentiality