Employee looking to retire

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Deborah was 56 when she came to us with three questions:

  1. Do I have enough money to retire?
  2. What do I do with my existing pensions if you think I can afford to retire?
  3. What is happening with the basic state pension?

During an initial meeting we got to understand Deborah’s financial situation and aspirations for the sort of retirement she wanted. She had a pension with her current employer, and an IOM Government (final salary) Pension Scheme from her time working as a civil servant.

This is what we did for Deborah:

  1. We produced a financial plan for her based on all of the information she provided us with, using our financial planning software. She could see the output from this in clear charts and pictures, which showed that she could afford to retire. She wasn’t given a blank cheque in terms of what she could afford to spend in retirement, but more importantly for Deborah it showed how much she could afford to spend on holidays, eating out and other nice things she wanted to do, without fear of running out of money.
  2. Now knowing that she could afford to retire it was then about funding her retirement in the most sensible, tax efficient and cost-effective way. Based on her specific situation, we advised her to do the following:
    • Set up an Isle of Man Self Invested Personal Pension Scheme (SIPP) and transfer her occupational pension scheme to it
    • Take the 30% tax free cash available from the SIPP and use this cash to fund the first five years of her retirement
    • Take no income from the SIPP for this five-year period, with the aim of increasing its value through moderate growth in the underlying investments that we advised her to hold within the SIPP
    • In 5 years’ time at age 61 start to take the income needed at the time from the SIPP and also start taking the IOM Government scheme pension. Her Government pension would be significantly higher for the rest of her life than if she had taken it at age 57.
  3. Deborah had read that a new flat rate state pension had been proposed in Tynwald and was worried that she may lose out in some way. We recommended that she should get a pension forecast from the Government and explained that the proposal is to preserve existing rights by paying the higher of the existing entitlement or the flat rate pension. Our knowledge of the proposed changes gave her comfort that she could depend on us to keep her informed of key issues that could affect her in the future, rather than having to worry about them herself.