Case Study of a Lump Sum High Return Investment

The adviser selected a custodian to take out an investment bond that had an 8-year charging structure coupled with QROPS trustee fee of 3%, split 1% to the trustee and 2% to the adviser. 3 years into the plan, the client wanted to retire, he took his 30% tax-free cash and thereafter took a modest income of £1,000 per month.

  HIGH FEE CHARGES

6 years after he took out the bond he discovered his investment was now worth £110,000 and aged only 68 he was very concerned he was going to run out of money during his retirement. We confirmed this to him because the investment bond was still charging fees as though he had £270,000 invested. Tailormade calculated (like so many times before) that the client had to obtain a return of 16% per annum to achieve a fund that would not decrease.

50% Reduced Charges

Tailormade would have possibly used a QROPS for the 30% tax-free cash. We would not have used an investment bond. We would invest directly into funds with charges linked to values with no access or surrender charges. Tailormade would have reduced initial charges by 50%.

In this case Tailormade would transfer the remaining fund away from the bond and invest in regulated funds and advise the client to reduce their income expectation. By doing this at the clients risk level, we can achieve the goal of the fund not running out, returns reduced from 16% per annum to 7% per annum and a client who can rely on his pension for the rest of his life.

All case studies are based on actual clients. Evidence is held in the main office and available there for further review. Clients’ names, providers and advisers’ names are withheld.