Case Study:
Phasing retirement suits self-employed

Roger and Helen Green

Roger, 67, is a self-employed IT consultant. His wife Helen, 62, is just about to retire from her job with a government agency. She will receive a pension of £8,000 a year. Roger has two personal pension plans worth £320,000. They own their own home mortgage-free and have other long-term savings of £30,000.

Their adviser tells them that Roger’s fund can only provide a pension income of £15,500 net of tax. Together with Helen’s pension this would leave them with net income at least £5,000 a year below their target. They will receive an inheritance of about £100,000 on the death of Helen’s mother, now aged 92.

They agree that Roger will continue to work part-time and will contribute as much as he can but at least £10,000 a year to the pension fund over the next three years. At that stage, they will review the situation.

One possibility is for Roger to use a ‘phased retirement’ scheme to gradually convert his pension fund into lifetime income. This gives the possibility of growth in the value of the fund and of a higher income as Roger will convert capital into income-producing assets at progressively higher ages. Investment of the inheritance could generate extra income of some £6,000 a year.

The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.

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