Fixed Term Retirement Plan

If you’re considering investing in a Fixed Term Retirement Plan, it’s often useful to read an example of how you could make the plan work for you. We’ve put together some scenarios to give you an idea of how different people could use the Fixed Term Retirement Plan.

These case studies are fictitious and only examples of possible scenarios.

Steve

Steve is 62 and the owner of a small removals firm. He’s worked hard all his life and has built up a pension fund of about £80,000. Steve now wants to take a back seat, handing over the day-to-day running of the firm to his son without retiring completely. He’s financially comfortable at the moment, so he doesn’t need an income from his pension fund. However, he would like to take his tax-free cash so he can travel to Australia to spend some time with his daughter and grandchildren.

As he’s not ready to fully retire, Steve doesn’t want to commit to buying a permanent retirement income just yet. He’d also to like see his pension fund continue growing, but at 62 he isn’t a great one for taking risks. On top of this, Steve’s a bit of a worrier as his father died suddenly in his early sixties. He’s concerned about what will happen to his pension fund if the same should happen to him.

With all this in mind, his financial adviser suggests he takes tax-free cash from his pension fund and invests the remaining value in the Fixed Term Retirement Plan for five years. He advises Steve to invest in both a guaranteed maturity value and the Aviva Guaranteed Fund. This way Steve knows his fund will be working for him, with the security of knowing there will be a guaranteed value when the plan matures. Steve is also more comfortable knowing that his wife and children may benefit from his pension fund if anything should happen to him during the term of the plan.

Toby and Marie

At 59 and 57, Toby and Marie are both looking forward to retiring, but haven’t quite taken the plunge yet. Marie is a part-time librarian and Toby is an accountant. He wants to cut down the hours he works so they can spend more time together. As Toby will be earning less, they want to use his pension fund to supplement the household income without locking themselves into a retirement income for life.

Their financial adviser recommends that Toby takes out a Fixed Term Retirement Plan. Together, they decide to take 25% of Toby's pension fund as tax-free cash and invest the rest for seven years, which takes them up to the age that Toby can claim his state pension. They invest in the guaranteed maturity value, so they know exactly what the value will be when the plan matures. They also opt to take an income of £5,000 a year, paid every month for the term of the plan, which will help top up Toby’s reduced salary.

Carol

Carol is 56 and a paralegal at a law firm. She has another 10 years before she will receive her state pension and a company pension. She wants to be able to ease herself into retirement, perhaps working part-time, but doesn’t want to compromise on her standard of living.

As she has 10 years before reaching state pension age, her financial adviser suggests that she take out a Fixed Term Retirement Plan, investing in the Aviva Guaranteed Fund for five years and taking an income to supplement her salary as she reduces her hours. His view is that she may change her mind about not retiring until she’s 66 or her circumstances may change. By taking out the plan for five years, she can review her options at 61. At that point, she could either retire and convert her fund into a retirement income or take out another Fixed Term Retirement Plan if she wants to continue working.

Talk to an adviser

You can only invest in a Fixed Term Retirement Plan through a financial adviser. The adviser will be able to tell you if this product is suitable for you.

If you don’t have an adviser, you can call us on 0800 404 6234 or visit www.unbiased.co.uk to find an adviser in your area.

We can only advise on our own products.

Printable version

WC04057 04/2012