John and his wife Sarah are in their early sixties. Sarah suffers from a chronic illness and although John was trying to care for her, he held a senior job and commuted to London. To enable him to look after Sarah, he wanted to take a lower paid part-time local role. Although their savings would bridge the income gap in the short-term, they were concerned that they could run out of money in later retirement.
We worked with John and Sarah to estimate their income needs for now and in the future. We calculated that once they were both receiving their state and private pension incomes, their income would suffice. Until this time however, there would be a deficit of around £5,000 a year if John took the local job.
On account of her ill health, we were able to draw from Sarah’s private pension early and secure a high rate of immediate income. This provided an additional guaranteed, and tax-free monthly income.
John also had a private pension that he could access from age 55. However, it didn’t have any flexible retirement features and he would have been forced to buy an annuity. He didn’t want to do this. As he was relatively young, buying an annuity would have meant he would give up the possibility of future investment growth.
Instead, we moved John’s pension to a more modern arrangement that allowed him to access his 25% tax-free cash entitlement in stages. John could draw the balance of £5,000 a year tax free, without cashing in the bulk of his pension. This enabled John to take the local part-time role and spend more time, caring for his wife, without committing his pension fund to an annuity too early.
We continue to manage the pension investments and meet John and Sarah regularly to help them plan their next steps.