Retirement advice
What are my options at retirement?
This page is for those of you who have now reached retirement age, or for whom it is imminent. If you are in the millionaire asset group and are not yet retired, a small business owner, employed or self-employed and need pensions advice, please follow the previous link.
If you about to retire, under current pension rules you will generally need to buy an annuity by age 75. (Unless you choose to use an alternatively secured pension plan.) Unfortunately many people still buy their annuity from their pension provider without first seeking experienced independent financial advice. At the very least everyone should look into using their open market option to determine the best annuity rate they could get from their pension fund.
These days there are many different options open to you rather than a simple annuity. Although the actual advice would be dependent on your individual circumstances these are some of the choices open to you.
Leave the pension alone
Do not touch the pension and leave it invested to continue to grow tax efficiently until such time as you need the income stream. The later you leave it (unless annuity rates decrease) the larger the income stream you will be able to generate as the fund will hopefully be larger and the annuity provider will not have to pay out for as many years.
Use a phased withdrawal plan
This allows you to gradually withdraw your pension lump sum and buy annuities every few years if you have other sources of income or retire more gradually.
Use an income drawdown plan
Usually for people with large pension funds who can afford to take an investment risk with their pension fund reducing in value into their later years because they have other sources of income. It also suits people who wish to withdraw the maximum possible out of their pensions as quickly as possible as these plans can pay a much larger income that can be achieved via an annuity purchase. However this also usually results in a reducing capital in the pension fund.
Buy a deferred pension plan
This type of plan enables you to obtain an income at similar levels to a level annuity but delay the actual purchase until you are older. There is no investment risk involved in this arrangement. This means that in later years you could be entitled to an enhanced annuity as your health may take a turn for the worse in your later years. As the annuity is not purchased until later the guarantee period for a dependent spouse can be extended significantly. These plans also allow you to use the open market option when the time comes to buy the annuity you want.
Buy a flexible annuity
These types of plans allow you to obtain an income that suits you with a minimum income guarantee and also the opportunity for investment growth with the obvious associated risk. A value protection option means that 100% of your fund less any income paid out is passed to your estate if you die before 75.
With all of the above choices or a mixture of any of them should allow everyone to make decisions to suit them at retirement. As always, experienced, fee-based, independent financial advice is essential.
Any questions on retirement options?
If you have any further questions regarding annuities or other retirement options, please don’t hesitate to contact us, either by phone on 01582 839280, or email us.
