How Julie saved £144,000
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