Case Study – Elsie

Having looked after Tom and Elsie for several years, the funding into a pension for her was minimal as they concentrated on Tom’s contributions.

The value being £19,000 – as at February 2014. After the budget announcement in March 2014, the Trivia rule changed to be that if the total of all one’s Pensions was less than £30,000; an individual could take the entire amount out as a lump sum with 25% being tax free and the remainder being taxed at the ‘marginal rate’.

As Elsie is 59, she can take benefits under the Trivia rules from age 60 – in 3 months time. These were the results:

Current Value£19,000(rounded figures)
Less Tax Free Cash£4,750
Remainder£14,250
Less tax at 20%(£2,850)£11,400
Net Total Paid Out£16,150

WITH ADDITIONAL CONTRIBUTION OF £10,000 – £8,000 paid and tax relief of £2,000

Value£29,000 
Less Tax Free Cash£7,250
Remainder£21,750
Less tax at 20%(£4,350)£17,400
Net Total Paid Out£24,650

Thus an increase of £8,500 for payment of £8,000 within 3 months gave a return of 25% (6.25% for a 12 month period) without any investment growth.

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