Retirement options advice
When you get to that stage in life where you are considering retiring, you can be faced with one of the most important decisions of your life.
You have built up savings, paid off your mortgage and you now have one or more pensions to support you for what will hopefully be a long and enjoyable retirement.
What shall I do with my pension? My existing provider has sent me a list of options – are there other things I need to be considering?
When you near your retirement date on your pension scheme your provider should write out to you listing some options.
You may have a pension fund and be asked whether you would like to buy an annuity with your existing provider or consider an open market annuity where you can source the best rate from other providers in the market.
You may have a final salary (defined benefit) scheme and the decision you are facing is: should I take my tax free lump sum with a reduced income or should I take a higher pension income.
Either way, you are not being provided with all of the options available to you.
If you purchase an annuity, you cannot change your mind. You hand over your pension pot to the insurance company and they promise you an income for life. If you get this wrong or if your circumstances change (which they often do) then you may be stuck with the wrong solution! Also, locking into an annuity rate whilst rates are historically low represents poor value. Surely an income now, with the flexibility to change later or even buy an annuity rate when they improve represents better value. Please speak to our team on what other options you have so your retirement can be tailored to your family circumstances and needs.
Final salary (defined benefit) schemes are often described as gilt edged pensions because they provide a known income which increases in value up to retirement age. However, when you reach retirement age some of those major advantages disappear. Although guaranteed an income for life (like an annuity), when you die, your spouse typically will receive either half or two thirds of the income you received. When you are both gone, your children or grandchildren receive nothing. These guaranteed death benefits are not pleasing! You have other alternatives that may suit your family circumstances. Please contact our team so that we can discuss what is right for you.
Please ask yourself
- What are my income needs?
- Should this income be protected against inflation?
- What tax free lump sum do I require?
- Am I in poor health?
- Is my spouse in poor health?
- Is my wife or husband adequately provided for if I died?
- Do I want my children or grandchildren to benefit from my pension pot? (your pension fund is often your largest asset and can be substantial)
- Have I considered any inheritance tax problems?