Posted on: 20th September 2019
WithAwareness Day taking place last Sunday (15th September), it is time to highlight that buying an annuity is not the only option available to retirees and there may be more suitable options to provide your income in .
The first task on the list: Run a Pension MOT
Knowing what you have saved up will inevitably help you make a concise and informed decision on the type of retirement you would like. Older policies may have guarantees or locked-in dates that restrict when you can access your, so it is important to know all the fundamental details.
Making sure that the stated retirement age on your workplace pension is in line with your retirement plans – According to Aviva, savers could miss out on £4,000 if the provider believes you are retiring at 65 instead of 68 as they automatically move funds into less risky investments as you approach your retirement age – this is known as lifestyling.
The next steps
Once you know where you stand, you may wish to look at your options to provide you with an income for your retirement.
Annuities have been the staple go-to option to provide a lifelong income in retirement for generations and are secure and guaranteed. However, falling yields on government bonds which insurers use to provide your income are falling to all-time lows and they could fall further with or without the market upheaval caused by Brexit.
Nathan Long, a senior analyst at Hargreaves Lansdown, demonstrated that annuity rates have fallen 14% since the start of 2019 where a pot size of £100,000 will now secure an income of £4,654 a year for a 65-year-old retiree, £759 less than January. Even those looking for enhanced annuities have seen double-digit percentage drops in income payment over the same period, according to Moneyfacts.
Since 2015, pension freedoms have allowed retirees to flexibly access theirto suit their needs. Whilst this can be seen as a riskier option as pension savings remain invested – you have the choice of investing in income-producing funds – 116 funds have been found that produced a regular income higher than the current annuity market, according to Long. This would allow you to generate income without withdrawing any capital ensuring the longevity of your pension fund.
Consider multiple income streams
The availability of UFPLS, Flexible Access Drawdown, Tax-free lump sums allow retirees to buy a mix of guaranteed income in terms of a small annuity and the flexibility of both pension and non-pension accounts.
Talk to the experts
Our team of financial planning experts, and our use of industry-standard analysis and modelling tools are ready to help you secure your financial future into retirement! Why not get in touch today and arrange your initial consultation.