How can I use my lump sum and funds (via a Pension Sharing Order) to maintain my standard of living following divorce?
- Mrs Ryan is aged 65
- Mrs Ryan has no pension provision in her own name
- Mrs Ryan wishes to obtain £45,000 pa (gross) income to meet her current expenditure
- Lump sum due on divorce of £1.2m
- She has a Moderate attitude to risk
- Pension Sharing Order value is £190,000
- £100,000 set aside for a cash reserve fund.
- Invest proceeds from the divorce in a portfolio of collective funds and Investment Bonds.
- Maximise ISA investment now and annually.
- £800,000 to ISA and collectives portfolio.
- £300,000 to Investment Bond.
- Diversify the funds over a spread of four broad asset classes (UK Equity, Overseas Equity, Commercial Property and Fixed Interest).
- Pension Sharing Order to provide immediate income.
- Mrs Ryan refer to her Solicitor to redraw her Will post divorce.
Benefits from advice given
- State Pension commences via substitution at approx £5,100 pa
- Draw natural income from ISAs and collectives portfolio at approximately £24,000 pa.
- Basic Income Tax allowances maximised via pensions and collectives portfolio income.
- Immediate pension income due of approximately £10,000 pa gross.
- Total gross income from Mrs Ryan’s investments and pensions of £45,000 pa gross.
- She will also have the prospect of capital and income growth over the long term.
- Investment Bond used to provide tax deferred withdrawals at 1.1%.
- She has adequate cash for emergencies to avoid drawing funds from her portfolio of investments.
- In due course, Mrs Ryan can seek advice on Inheritance Tax planning.
NB: No Pension Commencement lump sum is available from the Sharing Order.
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We will look to carry out a regular review of your circumstances, objectives, needs and portfolio performance to ensure all arrangements continue to be suitable and advise of any changes that may be appropriate.
This example is for illustrative purposes only, based on current legislation and tax allowances. Tax rules and regulations are subject to change.