At Retirement

CASE STUDY

 

Background

David and Sandra Clarke retired and held a number of assets and income streams which they utilised to fund their retirement planning. They held commercial property producing £40,000 pa rental income in joint names, and were both in receipt of state pensions and other annuities. David had a personal pension plan valued at approximately £700,000 from which he had already drawn all of the tax free cash.

David and Sandra contacted Manse Capital because they wanted to build an extension to their home costing approximately £60,000 using pension fund assets, whilst at the same time mitigating income tax as far as it is possible to do so.

 

Our approach

We sat down with David and Sandra and took a closer look at their financial situation before drawing up a cash flow forecast which focused on their long-term retirement plans. This helped establish whether the extension would be a viable option without impacting on their long-term income position.

We advised that the commercial property rental income should be moved into Samantha’s name, which would use almost all of her lower rate tax band and free up £20,000 of David’s lower rate band.

David’s existing guaranteed income from his state pension and other annuity payments was in excess of £20,000, so allowed him to enter flexible drawdown and to draw an unlimited amount of money from his pension fund, without being subject to the usual HMRC restrictions.

He was able to draw sufficient income from the pension fund in a one off transaction which resulted in him receiving £60,000 net of tax to carry out the extension build.

A group meeting was held with David and Sandra’s accountant and solicitor to agree the plan, ensuring that the transfer of the commercial property and the correct allocation of the rental income was carried out smoothly.

 

The outcome

The result was that David and Sandra could build their extension and also reduce their tax bill by approximately £4,000. In addition, David now has the flexibility to draw up to £20,000 pa from his pension and only pay basic rate tax on it, thus ongoing tax savings will be significant.

David and Sandra now have annual meetings with us where we update and review their lifetime cash flow forecast and financial plan, providing them with financial peace of mind to live the life they want, secure in the knowledge that they won’t ever run out of money.