InvestmentsSep 23 2020

Case study: Handling HNWI accounts

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I was in London recently seeing one of my biggest clients. I have known him for more than 20 years and he is worth more than £10m when you take all his assets including property into account.

Nevertheless, despite the properties, he still has a number of investments including pensions, shares and Isas that he has accumulated over the years. 

The client is single, aged 75 and still working in the City, but may retire this year.

His health is unpredictable, having lived a City life of liquid lunches and dinners, travelling to the far east on regular occasions and wining and dining clients.

In fact, his whole life is the City and I wonder what will happen to him when he does finally retire. 

However, this is not his main issue: it is inheritance tax, which currently stands at £1.7m and he is very concerned about it.

Some assets he is planning to give to charity and after many years of nagging him,I mean, advising him, he has finally made his will, leaving a number of bequests to friends and family as well as completing his lasting powers of attorney.

He would like to leave his estate to his niece, nephew and goddaughter who are each financially secure in their own right and stand to inherit from their parents as well.

So we have set up trusts and other plans. However, the real problem is the question of his pensions. Apart from personal pensions amounting to more than £1m, he has a defined benefit pension with a cash-equivalent transfer value of £2.12m.

If I took heed of all the horror stories about professional indemnity and the Financial Conduct Authority’s attitude to DB transfers, I would not touch it with a bargepole. 

Yet, if he takes it as income, which could be an equivalent of more than £70,000 a year, he stands to accumulate much of that in his estate, thereby adding to the inheritance tax problem. He has sufficient investments and other pensions to rely on.

In truth, I need not touch them in order to maintain his lifestyle until age 100, without even a consideration of selling some of his properties, which he now intends to do.

Rather than providing you with the solution that I have decided upon, I would be interested in anybody’s suggestion if they would contact me:

Marlene Outrim is a chartered financial planner at Uniq Family Wealth