The Finance Act, 1999 introduced flexible options on retirement for many pension arrangements. This has had a massive impact on the choices available to people when accessing their retirement benefits.
- Leave your whole pot intact until you decide what’s best for you
- Secure a guaranteed income by purchasing an annuity
- Flex you options with adjustable income investments to suit your needs
- Transfer out cash in amounts to suit your requirements
- Access your whole pension savings in one go, subject to tax
- Some or all of the above
These choices can seem overwhelming. The good news is, despite the confusion, there is a real opportunity to take control of what your retirement could look like.
Planning your spending in retirement is the most difficult of financial challenges you will face. Think how long it takes to decide which phone provider to switch to or what motor insurance option you will choose. Then think about answering the questions about how much money you will need to live on in 10 years, 20 years or 30 years.
It’s important to understand your options. Your individual retirement strategy will depend on your personal circumstances: whether you have dependents – spouse, children or grandchildren, whether you need a care plan due to poor health or whether you are considering retiring abroad.
You need to consider the best way to invest for drawdown and learn how to decide between cash, annuity or drawdown? There’s a risk your personal circumstances will change with a family death or there is another stock market crash. Invest too aggressively and your pension pot could reduce in value if equity prices fall. But invest too cautiously and your pension will have insufficient growth potential.
What is the right balance? Many investors know that it rarely makes sense to have all their ‘eggs in one basket.’ That is why some investors choose to diversify. By having a diversified portfolio you can create a scenario where you take less risk for the expected return.
Help is at hand so, take expert financial advice before making any retirement benefit decisions.