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Post Retirement Planning

On reaching retirement age or having taken your pension benefits earlier, a decision as how to best utilise your pension fund must now be made. The most common method is to opt for an Annuity.An Annuity pays an income purchased with the proceeds of a maturing pension fund. Unless there is a guarantee applied, an Annuity will pay out until you die. The amount of income an Annuity pays depends on the size of the pension fund and the amount of tax free cash you take. Other factors include age, sex, your health (in some cases) and the benefits you choose such as whether the Annuity is solely for you or you and your partner.

The older you are when you buy an Annuity, the higher the income you receive.
It is advisable to shop arouind for the best annuity rate via the open market option, which applies to most pension contracts. It is in your best interest to explore this option in order to obtain the highest possible income in retirement, as once the Annuity has been purchased it cannot be altered.

Choices that affect the level of income achievable include the following:

  • Would you like your income to be fixed, or rise each year?
  • Are you in ill health? An enhanced or impaired life annuity may be available.
  • Do you require a spouse's pension after your death and at what level?
  • Do you want guarantees to apply for 5 or 10 years? If you die within that period then your beneficiaries won't lose out entirely. They will continue to be paid an income.

You do not have to buy an Annuity with your pension fund at retirement. You may consider postponing buying an Annuity until a later date or draw an income directly from your pension fund instead.

An Unsecured Pension is an alternative to annuity purchase. After taking tax free cash, the rest of your pension fund remains invested. There are different options using this route the most common being Income Withdrawal whereby you can take a taxable income within certain limits direct from your pension fund. There is no minimum amount of income that must be taken. This route may be suitable for those with larger pension funds and who wish to retain control of the investment of their fund.

Other options include Phased Retirement where you draw an income from part of your pension fund leaving the remainder intact, alternatively you can purchase a short term Annuity. You buy a fixed term Annuity up to 5 years and at the end of the term you buy another short term Annuity. You can continue in this way until you buy a lifetime Annuity or reach 75. This option can be combined with Income Withdrawal.

Planning for your retirement is an important and sometimes complex decision. We recommend you seek expert advice and here at Goldberg Steele Associates we can help you plan for a more comfortable retirement.


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