Retirement Planning for both Pre-Retirement and Post Retirement is a major part of life that you may have been looking forward to for a number of years, or not. But retirement can also be quite daunting.
Finishing your working life can be a fantastic time; but making the right financial decisions, at such a landmark time in your life, can be daunting and probably the most important decisions you make.
There are a number of options available to you and it is important to get it right and get advice.
Buying a pension annuity is an important one-off decision.
An annuity converts the funds built up in your pension into a regular income for the rest of your life removing the worry of having to budget for an unknown period of time.
Under current UK pension legislation you can to start taking your pension benefits from age 55. You don’t have to give up work to start receiving your pension income.
Before you buy an annuity, you will normally be entitled to take up to 25% of your pension fund as a tax-free cash lump sum. The remaining 75% of your fund can then be used to buy an annuity. Alternatively, you could use 100% of your pension fund to buy an annuity.
There are many types of annuity available with different options attached to them.
Open Market Option
You don’t have to buy your annuity from your pension provider. Buying your annuity from another provider could increase the income available to you, particularly where your pension provider isn’t a specialist annuity provider or doesn’t offer enhanced income based on health issues.
Buying a pension annuity is an important one-off decision, possibly the most important decision you will make.
This option is designed to defer the purchase of an annuity, leaving your pension fund invested whilst drawing an income directly from it. The remaining fund is left invested until such time as either you decide the environment is right to buy an annuity or if such a day never arrives, perhaps indefinitely.
The income you take can be whatever you need (subject to a maximum defined by the Government’s Actuary) and within those limits can be increased or decreased as your circumstances change.