Making sure you achieve the type of retirement you have always wanted is not only reliant on how you have planned your finances, but also on when and how you choose to access them. You may also have concerns about the stock markets and wonder whether you can actually afford to retire just yet.
It is vitally important therefore that you understand the options available to you, as the decisions you make at this stage could influence your income for the rest of your life.
Things to consider
There are many factors you will need to consider before making a decision about what to do with your pension fund, many of which can be talked through with your Independent Financial Adviser.
- Should I use my pension fund to buy a lifetime annuity, Income Drawdown or explore other types of annuity and retirement options?
- Do I need to select a pension product which will pay a pension to my spouse, civil partner or dependents when I die?
- Where can I find the best annuity rate on the market?
- How do I protect my pension income against inflation?
Your options at a glance
A lifetime annuity converts your pension fund into a pension income which is payable for life. You can build in various options such as a spouses pension on your death, escalating income to account for inflation, and can build in other guarantees to guard against premature death.
If you have a lower than average life expectancy, i.e. if you are overweight or a smoker, or if you have a health problem, you could qualify for an enhanced or impaired life annuity. In some cases and proven by a medical report if required, this can lead to increased income compared to that of a standard lifetime annuity. Annuity rates will depend on your individual circumstances, such as health and lifestyle factors, as well as the rates available at the time of purchase.
If you decide you are not ready to buy a lifetime annuity, or wish to draw an income from your pension whilst continuing to expose your funds to the stock market, you could consider converting your fund to a drawdown pension or an alternative retirement option. Drawdown enables you to take a taxable income direct from your pension fund, whilst keeping it invested in a favourable tax environment. The tax treatment of any investments will however depend on your individual circumstances and may be subject to change in the future.
As you might expect, there are risks associated with entering into this type of arrangement which you will need to be aware of. It is possible that depending on the level of income you take, coupled with future returns from the funds that remain invested, your capital value could be eroded over time, thus leaving no guarantee to the level of income you will receive in the future.
As with any major decision, it is important to seek advice to ensure you are making the right choices according to your needs and circumstances. Our retirement planning experts identify what you want from your retirement savings and after searching the market, we can help you plan for a more flexible retirement and one that is right for you. Contact us at Torquil Clark on 0800 294 7199. Adviser charges apply.