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Case Studies
Case Study 3 - SIPP turns £31,800 into £84,600 in 1 week
In this case study we helped a client make a 266% return on his capital within 1 week by taking no risk at all with his money.
A client aged 51 earning £140,000 per annum came to us explaining that he wished to wipe out as much of his higher rate tax bill as possible for the year by making a pension contribution. He still required an income of c. £61,000 net for the year in order to live.
We approached his employer and explained that if instead of paying him £100,000 of his salary in this tax year they instead made a £112,800 employer pension contribution they would be in the same financial position. This is because employer national insurance needs to be paid on salary but not pension contributions.
As he was a key employee the company agreed. The net cost to the company of this pension contribution was the same as the £100,000 salary and as the employee would have paid 40% tax on this part of his salary his net cost was £60,000.
In addition the SIPP paid out the 25% tax free cash lump sum of £28,200 to the client immediately on day one.
The following was achieved with this planning :
Case Study 3 - SIPP turns £31,800 into £84,600 in 1 week
In this case study we helped a client make a 266% return on his capital within 1 week by taking no risk at all with his money.
A client aged 51 earning £140,000 per annum came to us explaining that he wished to wipe out as much of his higher rate tax bill as possible for the year by making a pension contribution. He still required an income of c. £61,000 net for the year in order to live.
We approached his employer and explained that if instead of paying him £100,000 of his salary in this tax year they instead made a £112,800 employer pension contribution they would be in the same financial position. This is because employer national insurance needs to be paid on salary but not pension contributions.
As he was a key employee the company agreed. The net cost to the company of this pension contribution was the same as the £100,000 salary and as the employee would have paid 40% tax on this part of his salary his net cost was £60,000.
In addition the SIPP paid out the 25% tax free cash lump sum of £28,200 to the client immediately on day one.
The following was achieved with this planning :
- Client gained a pension fund of £84,600 with a net cost to him of only £31,800 (increase of +266%)
- Client pays no higher rate tax for year
- Client net income remains at £61,519 net of all tax (£5,126 net per month)