Solution: Following advice, Peter elects to move the five properties held by the trust and the two he owns personally into a qualifying non-UK pension scheme (Qnups).
The total value of the combined property portfolio is £2.6m and the scheme’s trustees can easily refinance and consolidate the borrowing of £800k with a single lender on a loan-to-value of 31%.
In a financial planning context, Peter’s adviser has identified a number of key advantages which match his planning objectives:
• Through his salary plus other investment and trust income, Peter has sufficient earnings to maintain his lifestyle without relying on the residential property income, allowing that to be transferred to Qnups.
• By investing in residential property, Peter is selecting an asset class for his supplemental savings that he is comfortable with and believes offers attractive investment returns over his medium-to-long term pension savings outlook.
• The LTA places a restriction on Peter’s future pension income which will be significantly less than the earnings he currently enjoys but his financial commitments and lifestyle are unlikely to be reduced proportionately at his chosen retirement date. Through the Qnups Peter is therefore able to provide for supplemental retirement income to redress the balance if he needs it.
• If Peter does not need the additional retirement benefits at age 55 he can defer it until age 75 and even then can take a minimal income in a manner similar to the minimum Government Actuary Department drawdown requirements.
• If Peter were to die prematurely, the value of the fund does not form part of his estate and therefore is not subject to IHT. In addition to offering Peter what he needs in respect of his financial planning goals, the use of the Qnups “provides a tax benign environment for pension savings”.
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