Heather (58) had worked in the energy industry for most of her career. She had been considering taking an early retirement but needed someone to calculate whether this was financially possible.

She was also concerned that if anything happened to her there would be funds available for her family to call upon in the future.

She is married to Roger (49) who was also about to retire from the Police on a full final salary pension.

They have two children Amber and Melanie who are both in their early twenties, have full time employment and live with their respective partners.

Heather had two defined benefit (final salary) pensions, a company money purchase pension as well as a private pension plans and wanted to know what the implications were for taking early retirement, transferring the benefits to her own personal pension or leaving the plans where they were.

She was particularly concerned that Roger would only get 50% of her pension income if she died before him and after that, it would be lost.

We obtained the transfer values from each of her pensions including Cash Equivalent Transfer Values (CETVs) from her defined benefit pensions to establish the total value.  The two defined benefit elements of her pension were valued at £753,000 and the money purchase elements were valued at £230,000.

After considering their other assets, the fact that Roger will be on a substantial defined benefit police pension and the sale and downsizing of their main residence (freeing up considerable equity) we conducted a number of cash flow model scenarios, which indicated that she could afford to retire earlier than the schemes normal retirement age of 65.

We decided that Heather should retain one of her defined benefit pensions as this income, along with her other sources of ‘guaranteed’ income, met her anticipated fixed costs in retirement.  This meant that she could transfer her second defined benefit pension and consolidate it with her other money purchase arrangements, which allowed her to use flexible access drawdown as and when needed.

Alongside Roger’s pension, their investments, cash from the downsizing and the combination of pensions she retains we managed to give her and her husband the retirement they wanted, providing the flexibility of drawing a higher level of income in the earlier years of retirement whilst they are still very active with the ability to reduce income as desired in the more passive phase of their retirement. This allowed a bridge between her schemes normal retirement age and state pension age at which time more income would be available to them.

This also had the benefit of leaving her pensions to grow for the future benefit of Roger and their wider family in the future.

This case study is a hypothetical scenario to demonstrate how financial planning could benefit a client in a similar situation. It was not advice given.

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