What are the pension options in retirement?

What are the pension options in retirement?

Transferring out of a Final Salary scheme is unlikely to be in the best interests of most people.

The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.

The world of pensions can be a confusing minefield of jargon and difficult decisions – but it doesn’t have to be. Which is why we’ve listed five pension options for your retirement.

Take a regular income from your pension

Each month throughout your working life you will have received a monthly wage, so for many people, they will want this to continue in retirement.

Deciding how much that income will be is dependent on a number of factors including; the size of your pension pot, your lifestyle and the performance of your investments. There is also the consideration as to whether or not you will want to leave any savings to loved ones when you die.

Take money from your pot as and when you need it

Another option is to access your savings as and when you need to. Some retirees may already have other sources of income that will supplement their retirement, such as property or other financial investments.

With this option, there is a danger that you could take too much too soon, which would leave you with less to fund your lifestyle in the future. While accessing the pot is simple enough to do as a way to receive an income and/or lump sum, it is important to get the necessary financial advice before making any decisions.

Keep your pension savings invested

If you have been paying into a pension for some time the older you get the bigger the pot should become. If you are able to leave your pension invested for longer, you could benefit from further positive investment performance, which in turn could increase your income in retirement.

Of course, the size of your fund may rise as well as fall and you could get back less than you invested, which is why advice from a pension specialist is the way to go to help you get the best return.

Take your tax-free cash

If you’re turning 55 this year or have reached this age already and have a personal pension (defined contribution), then you are entitled to take 25% as tax-free cash. This may appeal to some people as a way of supplementing an early retirement.

It’s important to remember that only the first 25% is tax-free, should you wish to draw down on the remainder then it will be taxed. The decision will be if you want to take it all as one lump sum or spread the amount over a period of time.

Buying an annuity

Buying an annuity presents you with another option for your retirement planning. An annuity means that you are selling your pension pot, to an insurance company, in exchange for a guaranteed income for life.

Some annuities may be more appropriate to your circumstances than others, so seeking the help of a pension specialist is advisable.
However, annuities have become less popular, because rates have dropped over the last decade and the introduction of pension freedoms means that people have more flexible options as to how they access their pension.

Speak to the pension experts

Here at Pensionlite, our pension specialists have a wealth of industry knowledge which can help you to plan for your financial future and long term retirement. If you would like to speak to one of the team then you can get in touch with us at support@pensionlite.co.uk or call 01952 279 379