You, Financial Advisory Services
& Ince, in any case

Our client was approaching retirement age, and wanted to set up a financial plan to receive an income in a tax-efficient manner from their various investments. Alongside this, the plan needed to consider their inheritance tax position. 

The client had a personal pension plan, a workplace pension and a number of cash accounts (including cash ISAs). As they were looking to retire, they wanted to use their portfolio of investments to provide an income throughout their retirement. From this, they wanted to know whether their planned level of income would be sufficient to sustain a comfortable life and pay their expenditures throughout their retirement. 

In addition, they were also keen to ensure that their death benefits were set up to pass on to their beneficiaries in the most tax-efficient way when they pass away. 

After an initial discussion with the client, we created a cash flow modelling plan that highlighted their desired income and expected expenditure. This showed how their portfolio could provide a sustainable, tax-efficient source of income during their retirement. 

This plan also outlined how our client could ensure their death benefits mitigated IHT (Inheritance Tax) as much as possible. 

We moved their pension monies to a drawdown arrangement, where, in combination with their cash accounts would provide them with an income. 

As a result, the client was able to retire, with a financial plan tailored to their income requirements. This plan will be reviewed on an annual basis to ensure it remained on track with the client’s objectives. 

Our corporate client’s Managing Director was about to cease their membership of the firm-wide Death-in-Service scheme. They had passed the retirement age of the scheme, but was not intending on retiring soon.

The company wanted to provide them with the same level of life cover that they were entitled to under the Death in Service scheme. For various reasons, he was unable to re-join the Death-in-Service scheme as a discretionary member, and the company were not prepared to increase the retirement age of the scheme.

We recommended that the company to take out a relevant life policy to age 75 for when the Managing Director intended to retire. This would provide the same level of cover he would have under the Death-in-Service scheme.

A relevant life policy offered many advantages for both the company and the Managing Director. The benefit will not form part of the employee’s lifetime pension allowance, and the premiums paid will not form part of the employee’s annual allowance. As a result, the employee is still able to make full use of their annual allowance to contribute to a registered pension scheme.

In addition, premiums paid by employers are not normally assessable for employer or employee National Insurance contributions. Finally, the policy is set up using a discretionary trust, which means the benefits should be free of inheritance tax, and do not form part of the employee’s estate.

Due to the age of the client, and the cost of the policy, the insurer required medical underwriting. This was completed, and as a result, the plan was placed on risk, and the Managing Director now has life cover until he turns 75.