Scheme Pension

BACKGROUND

Richard Williams started taking Unsecured Pension (USP) shortly after his 60^thbirthday in June 2006. After taking his Pension Commencement Lump Sum (PCLS) he had £320,000 available for drawdown which gave him a maximum income of £24,576 per annum¹.

Richard has been taking the maximum income permitted, and wishes to continue to do so. The level of benefits he can take will be reviewed on 30 June 2011 as this is 5 years after benefit crystallisation.

Richard's pension fund is now valued at £280,000.

SOLUTION

Richard's Financial Adviser explains to him that if he continues in drawdown the maximum income available will be £17,920². This is under new capped drawdown rules that came into force on 6 April this year³.

Another option would be to consider a scheme pension. Richard is in fair health as he has high blood pressure, but is otherwise healthy. The maximum income available under scheme pension is £22,388 per annum and a pre-determined term of 10 years is available at no extra cost.

His Financial Adviser explains that the level of income will be reviewed every three years under both options, with the option for the member to request an annual review with drawdown or reviews at any time with scheme pension. If Richard's health deteriorates then the level of scheme pension can be reviewed to reflect his shortened life expectancy; this is not an option under drawdown.

The annuity option is also considered; the maximum available based on single life, level income with no guarantee is £19,227 per annum⁴.

Richard opts for scheme pension as he wants to keep control of his fund and this offers him the highest level of income. He understands the level of income is not guaranteed for life but is happy as he wants to keep his funds invested and to maximise income.

¹gilt yield was 4.5% in June 2006, 2006 GAD tables were used and 120% maximum income

²gilt yield for June 2011 is 3.75%, 2011 GAD tables used and 100% maximum income

³pending Royal Assent of Finance (No.3) Bill 2011

⁴best annuity quote from retirement-partnership.co.uk on 16 May 2011

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Financial Advisers

Jonathan Walker
Jonathan is the director and joint owner of the Pension Drawdown Company.

Robert Bolton
Robert is a practising Barrister and is also fully qualified as a Diplomaed Financial Adviser.

Bob Diamond
Bob is a Pension Specialist who has been with the company since its incorporation in 1996. Bob has been a financial adviser since 1989.

Andrew Ross
Andrew is a qualified financial adviser and is undertaking further training to become fully diplomaed.

Roger Easterbrook
Roger is a financial adviser with a background in Executive Search and is close to completing the Diploma.

Click here for more team members.

Market Monitor

Updated: 13th February 2012

US and European stocks retreated from their previous highs, and doubts about Athens' ability to structure its finances tested the market. An air of tolerance was evident as Greek politicians missed recurrent deadlines to agree austerity measures, aimed at securing a new €130bn bailout, and avert a default next month. However, once a deal was agreed, investor reaction was muted; the agreement was dismissed as incomplete by finance ministers and a further set of demands were issued.

Towards the end of the week, Standards & Poor's lowered its ratings on 34 Italian financial institutions including Italy's biggest bank, UniCredit. However Italy's 10-year yield, which is viewed as a benchmark indicator for eurozone stress, remained below 6%. A surprise came from the Australian policy meeting where the Reserve Bank of Australia defied expectations for a rate cut – this helped the Australian dollar reach a six-month high against the US dollar. Elsewhere, the euro briefly rose before going into retreat but ended higher against the dollar. In commodity markets, a sharp rise in oil dominated trading while copper hit a five-month high.

Important information: This update is intended to be for information purposes only.

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