I don’t want to tap into my £900,000 pension’

a year, as well as £30,000 in Premium mium Bonds and £ 155,000 in cash. Even though he has £1.1m set aside to fund his retirement, the Premium Bonds onds and cash earn next to no interest. . The bulk of the work will have to be done by his £500,000 investment account, ount, where Mr Scott will have to pay capital gains tax when he takes profits. ts. So meeting his £70,000 aim, especially lly when he stops working, will require re careful planning.

Kim Barrett

Managing director of Barretts Financial Solutions, an adviser: Given the state pension, Mr Scott needs his assets to produce £62,850 every year to reach his income goal of £70,000. A 5pc withdrawal rate from his bonds will provide another £ 12,500, reducing the target to £50,350.

There should be no problem generating the level of return he needs given the size of Mr Scott’s investments. For any balanced fund, an investment return of 5pc is not an unreasonable expecta- tion. However, the adviser’s charge e will need to be taken into account as well, leaving a 4pc return.

Mr Scott’s investment portfolio o of £700,000 would provide £28,000 00 a year at a return of 4pc, excluding g any

CGT or income tax, which reduces the remaini remaining income target to £22,350. He s should also sell some of his investm investment portfolio each year to take advanta advantage of the annual CGT allowance of £12,3 £12,300 and reinvest it within an Isa. Whil While Mr Scott no doubt feels comforted b by having a large amount saved in cash, it is holding him back. He sh should keep a smaller cash sum for eme emergency spending – say £15,000 – and in invest the remaining £140,000. A 4pc r return would provide an additional £ £5,600, bringing down his target income to £16,750. For n now, this is more than covered by his earnings. However, when Mr Scot Scott stops working there will be mor more pressure for his investments to deliver. At that time he could, of course, sell some assets to make up the difference. This would reduce the amount produced i in investment returns, but as he has such a large pot there is a low risk of o him running out of money. In the wor worst case scenario, he still has the £900,0 £900,000 pension.

Neil Moles

additional allowance of £350,000, or £175,000 each, but as the value of the taxable estate is more than £2m it will be tapered down to £33,000.

Mr Scott should reduce the value of his taxable estate to below £ 2m without allowing this to hurt his income target.

He could gift money into a discounted gift trust. This would allow him to benefit from an immediate reduction in the value of the estate, with the remainder falling out after seven years of the gift being made.

I would also look at assigning the investment bonds into a trust for the benefit of his sons. If they earn less, they may be able to withdraw the returns as income at a more favourable tax rate.

Mr Scott and his wife could also look to utilise their annual gift allowances of £3,000, carrying over the previous year’s if not used.

He should also consider that his pension is close to the lifetime allowance of £1,073,100. He could look to withdraw 25pc from the pension once the value nears the allowance limit. This would bring a large amount of cash back into his estate for IHT purposes, but it could be gifted into trust. Then, should he survive seven years after making this gift, it will fall back out of his estate.

If Mr Scott were to die after the age of 75, any withdrawals from the pension made by the beneficiaries will be liable to income tax at their marginal rate. This may therefore be another argument to crystallise the pension and gift the tax-free cash into a trust.

‘Premium Bonds and cash earn next to no interest. The work will have to be done by the £500k he has invested’