Tom – Business and commercial property owner

Tom was referred to a firm that uses i4C – initially for pension planning advice and most specifically on how to structure his income in retirement.

Tom owned significant levels of commercial property but few liquid assets. He also owned a share of a trading business which was valued at approximately £4m.

Whilst working he had sufficient income from the trading business to cover his expenditure but that would cease on retirement. He has a pension valued at c.£1m to access as required alongside the full state pension

"Tom was impressed by the impact of demonstrating the affordability of making pension contributions and the impact of not making them."

What were the challenges?

The questions that Tom set his planner were:

  • When should he be preparing to sell his share of the business and at what possible value?
  • Should he consider maximising pension contributions and what would be the impact on any lifetime allowance charges?
  • How does he maximise the potential IHT efficiencies of the pension fund given his potential to receive proceeds from the business sale?
  • Where should he take income from and when?
  • How does he ensure his ongoing financial security whilst providing sufficient value for his children when he dies?

How did i4C solve their challenges?

  • Firstly, i4C was used to demonstrate the affordability to maximise pension contributions using carry forward allowances without impacting current lifestyle.
  • Secondly, it showed that Tom would be able fund his lifestyle in retirement using his pension fund and commercial property income if necessary.
  • Thirdly, it proved that if the business were to sell, he could use those funds in retirement and ring-fence his pension fund as an IHT free, income tax efficient legacy his children.

Whilst the only immediate decision was around the affordability of pension contributions, Tom had been given the flexibility to consider different ways of funding his lifestyle when he chose to retire.

What was the outcome?

From the dynamic interaction with his planner facilitated by using i4C, Tom was impressed by the impact of demonstrating the affordability of making pension contributions and the impact of not making them. He knows he will eventually sell the business but what this exercise has shown is that process can be driven purely by commercial and lifestyle plans and will not be necessary to fund Tom’s plans in retirement.

"The complexity of tax calculations it performs relieves a huge amount of work from me and the outputs are displayed in a way that I can drill down into but remain simple on the surface for clients."

Steven Montague DipPFS EFA, Senior Paraplanner, Total Wealth Management

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