Case Studies

Featured below are a range of case studies detailing the kind of services provided to our clients.

Case Study 1: Holistic Tax-Efficient Financial Planning

The situation
Our client had created significant wealth over his working life. This was made up of property-related businesses and a number of investments held in a variety of tax wrappers. There was no cohesion in his planning and the portfolio was creating an administrative burden to the client and his family.

The client’s objectives were to:

Reduce the administrative burden of the portfolio
Diversify the investment holdings to provide greater flexibility and liquidity
To have a cautious approach to investment risk
Maximise the planning opportunities within his pension wrapper
Due to the nature of the investments, devise a long-term strategy to achieve the above.

How 80Twenty helped
Our initial advice was to maximise the planning opportunities available through the client’s pension.

When we met, our client’s property business had made significant annual profits and therefore any planning which reduced his corporation tax bill was of great benefit.

The client had unused annual allowance, in relation to pension contributions, available from the previous 3 years. This unused annual allowance was able to be carried forward, allowing him to make a contribution of £180,000 to his pension (the standard annual allowance being £40,000).

This allowed the client to take £180,000 from his business without it being liable to Income Tax or National Insurance.
The pension contribution is classed as a deductible expense from Corporation Tax.
The client is able to draw 25% of this fund tax-free as he is already over the age of 55.
The remaining fund can be drawn as taxable income in retirement, potentially at lower income tax rates.
If retained in the pension, the fund can be passed down the generations.
The fund sits outside the client’s estate for Inheritance Tax purposes.

The Lifetime Allowance for pensions was reducing from £1.25m to £1m around the time we gave this advice. However, HMRC allowed individuals to apply for Fixed Protection which retained a lifetime allowance of £1.25m as long as no further contributions were made. We ensured that the client made the £180,000 contribution before the deadline to cease contributions and then assisted with the Fixed Protection application. With the client’s overall pension now being valued at circa £1m, this Fixed Protection provides valuable room for it to grow without incurring Lifetime Allowance tax charges in the future.

The client has no need to receive any income from the pension at this time, and so has not elected to draw any pension funds immediately. Given the substantial wealth outside of the scheme, this has the additional benefit of keeping these assets outside of his estate for Inheritance Tax purposes.

Given that the pension remains a long-term part of the planning, we also consolidated the holdings in the scheme onto an investment platform, held in a bespoke range of funds in line with the client’s attitude to risk.

The result
This effective strategic tax planning reduced both Corporation Tax and Inheritance Tax, and will mean that this substantial, and liquid, asset can be utilised as and when the client’s scenario dictates. It has also become visible and the client is able to appreciate that the holdings are appropriate for his objectives and risk profile. This vehicle is now seen as an important part of his ongoing planning, whereas previously it was, to a large extent, ignored.

Case Study 2: Inheritance Tax

The situation
Our client was retiring from a business and realising a shareholding valued at approximately £1m. He was single and had a long-standing health condition that meant his life expectancy was reduced. His objectives were to:

Access to £200,000 via deposit accounts
Supplement his state and defined benefit pensions with income of £15,000 pa from his investments
Invest a further £200,000 for future income or capital needs
Utilise strategies that would help mitigate the Inheritance Tax his future beneficiaries may pay, so long as he still retained some access and control over the funds.

How 80Twenty helped
We initially assisted with some fundamental planning, sourcing deposit accounts for the £200,000, and investing £200,000 across tax-efficient vehicles such as ISAs and Investment Bonds.

To incorporate the client’s desire to mitigate future potential Inheritance Tax liability, alongside his immediate objectives, we firstly recommended a Discounted Gift Trust for £300,000. The features of this trust included:

Retaining the right to income during our client’s lifetime, set at £15,000 per annum
Appointing him as Trustee, giving him control over the investment strategy and future beneficiaries
An immediate amount (‘Discount’) of £120,000 falling outside of the estate for IHT purposes
The full assets of the trust falling outside of the estate after 7 years

We then recommended a further £300,000 be invested in a portfolio of AIM shares.

AIM shares qualify for Business Property Relief after being held for 2 years and are therefore not subject to Inheritance Tax.
As the business share sale that funded this investment had already qualified for 100% Business Property Relief from Inheritance Tax, the investment was eligible for Replacement Property Relief.
This relief meant the investment retained 100% Business Property Relief, without the need to go through the 2-year holding period that HMRC typically requires.
Our client therefore retained full control and access to this investment, but with it remaining outside of his estate for IHT purposes.

The result
Our client lived for approximately 10 years after the planning was put in place. He had access to substantial income and capital during his lifetime and, indeed, gifted further monies away over the years. However when he unfortunately passed way, the planning we had put in place meant that an overall estate valued at approximately £1.5m was only subject to an Inheritance tax liability of £40,000.

Case Study 3: Pension Scheme Rationalisation

Company overview:
Employer: Cooper UK (now part of Eaton following the $11.8 billion purchase of the group in 2012 – Eaton globally has circa $20billion annual turnover and employs approximately 95,000 people)
Industry: manufacturer of various electrical components, tools and lighting
UK staff: 4,000 plus

The issue
A series of acquisitions had led Cooper UK to have extremely complex and fragmented employee benefit provisions. This included:

10 different pension schemes, five of which were still open to accrual or new entrants;
active schemes covering both defined benefit (DB) and defined contribution (DC);
several different providers; and
several different contribution structures, including some bespoke arrangements.

Cooper UK felt that this inherited structure was poor as it was not aligned with their future objectives.

The business was also keenly aware of the significant trustee liability and time-commitment involved in running many of their schemes.

How 80Twenty helped
Cooper UK chose 80Twenty to design the solution, then manage and implement a transition from the ten existing pension schemes to one scheme for the whole of their UK operation.

Working together with Cooper UK’s European Vice-President of HR, senior management and HR staff, 80Twenty has successfully streamlined these benefits and designed a new benefit structure for all staff going forward. After 30 months of work and consultation with Cooper UK’s employees the outcome was:

All of the old schemes are now closed;
A single new contract-based DC scheme has been successfully implemented and is now running smoothly;
A bespoke communication process, including over 1,000 hours of face-to-face advice, has been undertaken;
The communication process engaged employees and got them involved in the changes, enabling the generous contribution structure introduced by Cooper UK and the service provided by 80Twenty to be valued and appreciated;
Significant cost savings have been achieved; and
Cooper UK staff now spend considerably less time managing the benefits they offer employees, including a significant reduction in the hours that the HR and payroll teams spend on pension administration.

Today
We continue to advise the UK entity, alongside their global advisers. The relationship is now a decade old and we remain retained to help the group support its HR function and provide advice to its employees via our employee helpline. The support spans all aspects of their corporate pension proposition and decision-making for their accrued pension benefits.

Case Study 4: Full Employee Benefits Review and Restructure

Company overview:
Employer: Unipec UK (part of Sinopec, ranked 3^rd in Fortune 500 list in 2017)
Industry: Petrochemical
Global Employees 700,000 plus, UK staff 75

The issue
In the UK, Unipec employs a team of Oil Traders and support staff. The pension scheme, prior to our involvement, was introduced by their UK bank, which acted as both pension scheme provider and adviser. As UK banks started to exit from this market, a new scheme and new technology was required to match the status and demands of Unipec.

They also felt that their insured employee benefits had become expensive, and wanted an independent review conducted to ensure they were receiving value for money.

How 80Twenty helped
At the end of the pension review a new scheme had been implemented and delivered on time, meeting all of the client’s objectives and delivering further value, including:

The new pension scheme was introduced with a provider that had confirmed its commitment to the Corporate Pension market by heavily investing in its in-house systems to manage Auto Enrolment, helping employers meet their obligations under this new legislation.
An improvement to the technology and functionality of the scheme, resulting in more-efficient processing of pension administration for the employer.
A significant reduction in the annual management charge from 0.65% to 0.26%.
A streamlined process offered by the new provider which could facilitate the transfer of each member’s previous accumulated fund.
80Twenty managed and implemented the conversion to the new scheme for the UK employees and sat with every scheme member to provide full support for the transition process.
This ensured the employees were not disturbed by the change and appreciated the added value being delivered.
At the end of the process the scheme had been implemented and delivered on time, meeting all of the client’s objectives.

We then conducted our full review of the insured benefits which included Death in Service, Income Protection and both UK & International Private Medical schemes, delivering the following:

Reductions of up to 15% across the insured benefits at their next renewal date.

This was achieved without needing to change the insurers or diluting the underlying cover offered by the schemes.
Employee communications were reviewed to ensure that the benefits were more fully understood and utilised.
Dedicated contacts were put in place to facilitate efficient day-to-day management of the schemes.
The work on these benefits is ongoing, with 80Twenty consistently negotiating reductions in renewal premiums and ensuring that Unipec receive value for money and are able to meet their changing needs.

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Case Studies