Building up a pension for your retirement takes many years and can involve short term sacrifice in return for that longer-term peace of mind. Therefore, when you come to retire, you need to make the best of that pension fund and see that it not only gives you the best income possible but keeps on providing for the remainder of your life. Remember however, thanks to medical improvements and lifestyle changes, this could be an especially long time.
According to the Office of National Statistics, a male aged 65 is now expected to live another 19 years; a female another 22*. For a couple, the combined outlook will be even longer – so you want to beware of simply taking the 1st or perhaps the highest quote for a level pension without some consideration. Over the course of time that could leave you a lot worse off.
Annuities do exist nonetheless, that can help safeguard against any inflationary effects. Known as \’index-linked \’, their return follows the RPI so that, as inflation rises, so does your income. Your income level could be lower initially over time , you may be assured its buying power will be upheld. This enables you to plan with confidence and supplies protection against any unexpected inflation shocks.
For the more daring, an investment-linked annuity might be an option. This provides income based on the performance of a portfolio of shares, property and fixed interest securities. You take a chance as the assets can fall as well as rise (so in a troublesome period, your income could also fall) and they\’re therefore not right for everyone.
One other option that is becoming more and more popular when thinking about investing in a pension is the idea of being able to take an early pension release. The concept of having the ability to receive up to 25% of your complete allowance pot once you are over 55 is definitely appealing. Most people considering retirement envisage themselves taking long holidays and spending more time with friends and family. This tax free sum would certainly help people to realise their dreams. Of course, it is important to consider every option available to you before any last decision is made.
Information thanks to Adviser Hub. We do stress that before you take any action with regards to obtaining an unsecured pension or taking an early pension lump sum that you undertake a total pension review with the aid of a qualified pension adviser.