Background
Alan Smith is retiring from his career as a commercial airline pilot at the age of 65 after having served with a number of airlines. He lives with his wife in a mortgage free home; his children are not financially dependent Unfortunately, Alan had been advised many years previously to transfer his deferred final salary pension benefits to a private pension. At the time of transfer his benefits had a cash equivalent transfer value of £1 million but during the bursting of the “tech bubble” in 2001 & 2002 the value had fallen to around £550,000 as monies had been invested primarily in equity funds.
In 2003 Alan became a client of VWM and our first course of action was to recommend that he lodge a complaint with the advisory firm in question in respect of the pension transfer advice he had previously been given.
VWM recommended that Alan’s pension funds were transferred to a SIPP and monies invested in the VWM Balanced Portfolio which was managed on a discretionary basis by VWM Investment Management.
Client Objectives
Alan has stated that he and his wife require a joint, net income of £4,000 per month to meet their lifestyle requirements in retirement. He is seeking clarity from VWM about the retirement income options available to him from his pension fund. He doesn’t like the idea of giving up control of his SIPP fund for an annuity but wants to keep all his options open.
He also has a real concern about “running out of money” in retirement and would like VWM to run the numbers for him.
Results
VWM provided a detailed report on the income options available to Alan. We looked at the following:
- Annuity purchase – joint life
- Unitised Annuity purchase
- Tax free cash and unsecured pension
VWM also provided Alan with a Lifetime Cashflow
Analysis Report which clearly and concisely
highlighted his current assets; his income, his
expenditure and crucially with an agreed set of
assumptions to issues such as inflation, investment
growth, risk and mortality. VWM was able to highlight
to Alan that together with their joint state pension
income and a small pension income from his wife’s
previous employer they were able to achieve their
stated net income objectives of £4,000 per month.
VWM recommended that Alan begin drawing unsecured pension income together with a phasing of his tax free cash.
Finally, after almost seven years, Alan received a compensation payment from the Financial Services Compensation Scheme in respect of the initial complaint he had made to his previous adviser with the assistance of VWM. He elected to receive this payment as a tax free lump sum rather than pay monies into his pension.
Key Results
- Alan now in control of his finances during his
retirement.
- £4,000 net income paid to client via a combination of phasing tax free cash and unsecured pension benefits.
- Alan’s assets are likely to last until his 100th birthday.
- Alan and VWM meet each year to conduct an annual review of investment performance and his financial plan.
- Client obtained financial redress as a result of previous miss-selling.