Your options at retirement

Your Options At Retirement

How to turn your retirement savings into a lifetime income

As you get closer to retirement, there are a lot of things to think about. It’s so key to really know your options at retirement. It’s a good idea to start by looking through your money to ensure that your future earnings will allow you to live the life you want. The sooner you start thinking about what you’ll need in retirement and where you’ll get your money, the more control you’ll have over that phase of your life.

Because of the changing retirement scenario, some people are modifying their retirement expectations. With life expectancy continuing to rise, the need to save and plan for retirement is becoming increasingly important.

As seen through the eyes of those who are currently saving for retirement, the term “retirement” can have a wide range of meanings. However, traditional ‘retirement’ is evolving, and few people today regard it as a one-time occurrence. Instead, the future of retirement will likely witness a fundamental shift in people’s lifestyles, with a growing desire to combine work and leisure to assist manage the costs of living longer. This makes it essential to assess your options at retirement.

It’s also vital to keep in mind that any investment entails some level of risk. All investments have the potential to go up as well as down, and you may end up with less money than you put in.
A pension is a long-term investment that typically does not become available until the age of 55 (57 from April 2028). The value of your investments (and any income generated from them) might go up and down, affecting the amount of pension benefits available. Interest rates at the time you accept your benefits may also have an impact on your pension income.

What can I do with my pension?

Your options at retirement really are varied when you get there. Because of reforms made by the government in April 2015, you now have greater flexibility than ever before when it comes to taking money from your pension account once you reach the age of 55 (subject to change). However, before you do anything with your hard-earned money, you should take the time to learn about your alternatives, as the decisions you make will have an impact on your retirement income. It’s crucial to question yourself if you actually need the money right now before taking money from your pension plan. When and how you take your money can have a significant impact on the amount of tax you pay and how long your money lasts.

Most pensions have a cut-off age when you can begin drawing money from your pension. They’ll also have restrictions about when you can retire earlier than usual, such as if you become very ill or unable to work. You’ll need to select how you want to withdraw money from your pension when the time comes.

You can take up to 25% of the value of your personal pension or defined contribution pension as a tax-free lump payment if you have one. The remaining portion of your pension fund will be taxable and can be taken as cash, used to purchase an annuity (a guaranteed income for a set term or for the rest of your life), or left invested. With which you could take regular withdrawals.

Annuities, guaranteed income for life

Annuities allow you to convert your pension fund into a lifetime income stream. They used to be the most popular way to save for retirement. Changes to the pension freedom rules, on the other hand, have provided savers more options. The amount you’ll get is determined by a number of criteria, including how long the insurance company expects you to live and other annuity features like a set payment period or payments to a spouse or dependent.

Annuities might be for a set amount of time rather than for life. This is important if someone wants a guaranteed income for a portion of their retirement, such as before they receive the State Pension.

Flexible retirement income – pension draw down

When it comes to evaluating pension choices, income draw down offers the most flexibility, since it allows you to access your money while leaving it invested, allowing your savings to grow.
In most cases, pension draw down allows you to withdraw 25% of your pension fund as a tax-free lump sum or a series of smaller sums.
The Pension Commencement Lump Sum, or PCLS, is this “tax-free cash.”

The remaining portion of the fund is invested and used to provide you with taxable income in the form of regular or sporadic withdrawals. You choose your desired income, which may be altered on a regular basis depending on the performance of your investments. Because, unlike a lifetime annuity, your income is not guaranteed for life, you must carefully manage your investments.

Uncrystallised Funds Pension Lump Sum (UFPLS)

You don’t have to take your pension’s start-up lump payment right away. Instead, you might use your pension fund to take cash when needed and leave the remainder untouchable, allowing it to grow tax-free. The first 25% (quarter) of each withdrawal is tax-free, while the remainder is taxable income. You may be charged each time you withdraw cash and/or have a limit on how many withdrawals you can make per year. This is just one of your options at retirement, let’s look at another.

Mixing and matching

It may be more convenient for you to use a combination of the above alternatives. You could want to put some of your funds into an annuity to cover the necessities (rent, mortgage, and household expenditures), and the remainder into an income drawdown plan that allows you to choose how much and when you withdraw. Alternatively, you may prefer more flexibility in your early retirement years and greater security in your latter years. If this is the case, delaying the purchase of an annuity until later may be a wise idea.

Professional advice

When you are assessing your options at retirement, it often can be best to get professional financial advice. As you can see from the previously mentioned methods, there is more than one way to go about using your funds. These obviously all depend on exactly what scenario you are in. Which can also be one of many, many different situations.

Being in all these different situations with complex solutions, how can you know what to trust? A whole of market advisor with over 35 years experience in the pension marketplace can be a good place to start. That’s where our advisor Tony Hollom comes in. You can get in touch with him directly here and also look at his profile here.

Regulatory Statements


All investments involve a degree of risk of some kind. This section describes some of the risks which could be relevant to the services we provide you. We may provide further risk information during the course of our services to you, as appropriate.

Our services relate to certain investments whose prices are dependent on fluctuations in the financial markets outside our control. Investments and the income from them may go down as well as up and you may get back less than the amount you invested. Past performance is not a guide to future performance.

True Advice Financial Services is a trading style of TA and SE Hollom Ltd. Which is an Appointed Representative of New Leaf Distribution Ltd. Which is authorised and regulated by the Financial Conduct Authority : Number 460421.

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