If you're approaching retirement with a certain amount of trepidation, that's understandable since you could well be contemplating life on a reduced income and worrying about how to cope with the rising cost of living in the years ahead.
You need to assess your assets and set some priorities. A good starting point would be to look at your existing investments and think about repositioning them so that they can aim to produce a better level of income - or have the potential to grow faster so that you'll have a good nest egg when you need it in a few years.
You may well have a mix of ISAs, funds, cash, or income from property. You may also be counting on future earnings from part-time work. High on your pre-retirement priorities should be getting the most from any existing pension funds. If you have a final salary scheme check with your employer to find out how much income you will receive.
If you have personal or protected pensions, free-standing additional voluntary contributions (FSAVCs) or belong to an occupational money purchase scheme, you normally have two options.
The first is to buy an annuity and the second is to take the income drawdown route. Annuities are provided by insurance companies which promise to pay a regular taxable income in exchange for your pension fund, no matter how long you live. But not all annuity providers offer the same terms.
The difference between the best and worst annuity incomes can be as much as 30 per cent - much more if you are entitled to enhanced rates as a result of ill health or your lifestyle and - since you rarely have to stay with your existing pension provider when you retire - it will almost certainly pay you to shop around for the best deal.
We can help you do that through our annuity supermarket which searches a panel of top providers, and will enable you to experiment with all the different options as many times as you like and see how they affect the income you would receive. Alternatively you can call our annuity team on 0117 980 9940.
In general, however, you can arrange for your annuity's value to rise in line with the retail price index, have it paid to a spouse or dependant for a period after your death which we would always suggest considering if your spouse or dependant relies on you financially, or be guaranteed to pay out for a certain period even if you were to die early.
The choices you make are important and cannot be changed once the annuity is set up. You should consider both your immediate and long-term needs carefully when making your decisions and it may be that income drawdown via a drawdown pension would be a useful alternative, although it is higher risk and not suitable for everyone. A drawdown pension enables your fund to remain invested while you take a taxable income within limits defined by the government. Consider this only if you are prepared to risk your investments losing value or your fund being totally depleted before you die, by drawing too much income.
Finally, if you have not taken an annuity by your 75th birthday, you could opt for an alternatively secured pension (ASP) which is similar to drawdown but with more restrictions.
» Find out more about annuities
» Find out more about drawdown
Alternatively call our helpdesk on 0800 138 2121.
