It is important to understand your retirement options as there is a vast array of income-bearing products and benefits available.
Choosing the right retirement plan can have a significant impact on your financial future. Our adviser can help you navigate this complex landscape and create a retirement plan that meets your individual needs and goals.
When creating an income strategy, you have the options of:
Taking your pension fund as a lump sum
The pension freedoms legislation came into force in April 2015 allowing savers to flexibly access their defined
contribution pension from the age of 55. This mean you are able to withdraw all your pension as a cash lump sum however, this would not usually be advisable unless you use the money to buy an annuity, as you may end up with a large unexpected tax taking.
Normally the first 25% of the total value can be taken as tax free cash with the remainder being taxed at what is referred to as your marginal rate of tax. Marginal tax means that during the tax year when you cash in your pensions the amount cashed in after the first 25% is then added to any other taxable income during the same tax year and is taxed as though it was earned income.
Guaranteeing income for life
You can use your pension fund to buy an income that is guaranteed for the rest of your life – this is called an annuity. Most Annuities are fixed and can not be changed once started. The amount that you receive will depend on the annuity being offered. This may not be beneficial if you are looking for flexibility in the way you access your pension funds.
Drawing down a flexible income
Income drawdown is a way of taking an income directly from the money you’ve built up in your pension fund. Allowing you to design how and when you take your money. You can decide the level of income you receive and change this as your circumstances alter.
Guaranteeing your income for a fixed period
You can purchase a fixed term annuity where the income guaranteed will end after a chosen amount of years with a maturity value. The same options apply as life time annuity except you choose a shorter period of time. This will then give you the option of designing your income options at a future date.
Leaving parts of your pension to a later date
Your circumstances may allow you to defer your retirement, in the same vain you may not yet have reached your retirement income targets. Retiring later can give you more opportunity to save for your retirement and, as you will be older, you may be entitled to a larger guaranteed lifetime.
Using a hybrid of these options
Using a mix of flexible and guaranteed income in retirement can help you achieve a balance between stability and flexibility in your income streams. This can provide you with a reliable and predictable income while also allowing you to adjust your spending based on changing circumstances or unexpected expenses. Additionally, the combination of these income sources can provide a level of protection against market volatility and other economic uncertainties. A hybrid retirement plan may provide a more comprehensive and flexible approach to retirement planning that helps you achieve your goals and protect your financial future.
For a financial adviser to create a suitable income strategy they need to understand your personal and financial circumstances in much more detail. This will allow them to provide advice and map out a plan for you and your retirement. Call our team and arrange for a call from one of our advisers today.
Create your own personalised retirement options report to help you understand how these options can work for you.
It will calculate your tax liabilities, provide fixed term and life annuity quotes and help you understand what your drawdown capabilities are.
Create your personalised report.
Our guide can help you understand your options in retirement.