Alice is 60 with a £400,000 pension pot. She is cautious in nature, but is comfortable investing some money in the stock market. She does not have an immediate need for tax-free cash, and would like an income of around £18,000 a year.
Alice’s financial adviser suggests investing £300,000 in the LV= Fixed Term Investment for seven years, with the remainder in a fund suitable for her risk rating. They then plan to reassess after seven years once she receives her state pension.
Alice is keen for her spouse to take over the plan should she die during this time.
Her adviser therefore suggests adding Plan Protection as a death benefit, so the plan continues after her death. This means that the plan can remain in force and can be used to provide beneficiary drawdown for Alice’s spouse.
The LV= Fixed Term Investment then pays the £18,219 a year income monthly into the SIPP bank account. And, at the end of seven years pays a guaranteed maturity value of £259,651 from the original £300,000 investment. The SIPP bank account then pays this income in a tax-efficient way, taking 25% tax free.
With no other income, Alice’s personal allowance of £12,570 and taking 25% tax free, she will be taxed on a small portion of this money.
Alice receives £18,000.15 net from her pension pot – aligning with her original requirements.
For more detail on Alice’s retirement journey, including a useful illustration of how the Fixed Term Investment works, read the Fixed Term Investment Adviser Guide.
