Mr & Mrs J
Mr & Mrs J own a company that operates a busy garden centre. A new coffee shop was part way through construction and various other items of capital expenditure were needed.
However, the bank was applying pressure to reduce gearing and approximately £750,000 was needed in the short term.
The solution lay in the shareholder/owner's pensions. Old pension benefits had accrued to the value of about £750,000 but the schemes couldn't facilitate the purchase of the company premises.
Benefits from the old schemes were transferred to a new scheme, and the old schemes closed. Within the new pension scheme framework, the business premises were exchanged for cash.
- £750,000 from the pension scheme was paid in to the company bank account. The pension scheme acquired the business premises and the business acquired £750,000.
- The company was then able to pay down debt, finish the café and deploy capital to other parts of the business.
- Capital gains tax (CGT) would no longer apply if the property were to be sold, as pensions don't pay CGT. Instead of paying a mortgage on the property, the company now pays rent to the pension scheme, which counts as a business expense, and can therefore be offset against income for tax purposes. With mortgage repayments, only the interest can be offset.
- In the event of bankruptcy the business premises, being owned by the pension scheme and not the company, now benefit from protection afforded to pensions.
"If a bankruptcy order is made on a bankruptcy petition presented on or after 29 May 2000, all pension schemes that have been approved by HM Revenue and Customs remain outside a bankrupt's estate. This means they cannot be claimed by the trustee in bankruptcy. This follows the introduction of the Welfare Reform and Pensions Act 1999." source The Insolvency Service August 2013 - URN 13 -1128
From previous jobs, Mr C had several pensions that produced a mountain of paperwork. He had no idea how his money was invested, nor of what he would receive once he started to take benefits. In addition, his investments took no account of his attitude to risk, and he felt he had no control over investment decisions.
He arranged a discovery meeting, and asked us to carry out a review of his pensions.
He wanted to know what he owned within his pensions (his portfolio), and in what proportion – his asset allocation. He was unsure about the outlook for his portfolio with the current allocation and doubted that it would achieve the desired target. Mr C wanted access to fund managers and was unclear about the information he'd need to stay on track. Could we help him do that, and how much would it cost?
After two meetings, several discussions and our written report, he was happy to go ahead with Abacus Advice. We moved all his pensions into one, and the investment portfolio was crafted to his requirements. And with ongoing stewardship of his investments, he's clear about his target. In consultation with us, he has control of investment decisions, as well as access to funds run by some of the UK's most successful investment managers.
He will benefit from new pension rules once they take effect, and in the event of his death, the pension scheme trustee will be aware of his wishes – a change from his previous scheme. He gets online access to information about his pension as well as concise, regular reports. Finally, very little paperwork.
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