For many generations retirement was a straightforward idea where you worked until 60 or 65 and then lived off the pension income from your employer and the state pension. Today retirement is a far more fluid concept with many working well into their 70’s and beyond. Many people reduce hours, go part time or take on a lower paid or consultancy type role. With mortgages into later life and helping children with increased education costs or onto the property ladder many peoples costs in retirement are often much higher too. Throw in plans to travel the world or live abroad before the rapidly escalating costs of longer term care and there is much to consider.

The good news is that pensions have actually kept up with the changing retirement landscape and now offer far more freedom than they have ever done previously. You are now free to draw from your accumulated pension pot at from age 55 whether still working or not and can draw out as much or as little as you like without restriction. 25% of your pot remains tax free and the balance incurs income tax but the access to lump sums and variable income can be a big help.

You can still purchase an annuity to provide guaranteed income or take flexible unsecured pension income (also known as income drawdown). Annuities are designed to provide a known benefit for life regardless of how long you live but don’t typically offer a lump sum death benefit. Income drawdown is much more flexible but as your pot remains invested it is down to investment performance over time to ensure your income is maintained so your income can reduce or run out altogether. You can also mix and match the two options to get the best of both worlds.

You even have more choice over whom and how to pass on your pension. Historically half your income tended to pass to your spouse and ceased on second death. The income drawdown route today allows you to pass the whole pot to whomever you chose and if kept within a pension wrapper can now pass through multiple generations. Pension death benefits are typically entirely tax free if you die before age 75 and liable to income tax to the beneficiary if after age 75 but in nearly all cases does not form part of your estate for inheritance tax purposes.

More choice in how and when we take our retirement income can only be a positive thing but with more choice comes more complexity and risk. Should you take a guaranteed income that dies with you or a flexible pension that could run out? It has never been more important to fully review all your pension options before taking a scheme pension or annuity from your current pension provider. Shopping around can significantly increase the income you may receive. The key factor today is looking at all your likely retirement needs and planning a pension solution that most closely matches this.

Flexible drawdown

Income drawdown

Phased retirement

Enhanced annuities

Ill heath pensions

Early retirement

Triviality and smaller pensions

Guaranteed annuities

Safeguarded Benefits

Hybrid annuities

Scheme pensions

Cash flow Forecasting

Retirement income projections

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