Please visit our new site for the most up-to-date information www.schoolfeesadvice.org

Case 5: An instant Pension

A 53 year old professional earning in the region of £155,000 gross per year with his spouse was looking to rationalize his finances. His daughter was already attending an Independent School and was expected to go on to university. The estimated fees totalled £180,000.

The client’s financial objectives were to :

• Fund the completion of daughter’s education (client would then be 62)
• Reduce tax bill
• Build an adequate pension to retire at 60

As the client was over 50 and earning a significant income, the recommendation was to pay the next school fee by investing into a pension and taking the 25% cash lump sum immediately. As a higher rate tax payer this actually would give a saving of 67% of the fee. Future school fees would be paid in a similar manner. Existing monthly savings plans and money allocated to pay fees would be diverted into a private pension. Additional lump sums would be added to the pension fund at strategic points to make it possible to pay future school fees out of the tax free lump sum. The last couple of years of university fees would be paid out from some of the income from the pension.

In total the plan recommended was £45,000 cheaper than the client’s current arrangements and an additional pension pot of approximately £400,000 would be realised.