At Retirement

At Retirement

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

Are you looking for At Retirement Advice ?

At Sterling we think about pension and retirement planning in two distinct parts.

Firstly, there will be a stage in your life when you are working and saving to build value in your pensions and / or other retirement savings vehicles and we discuss that stage on our Pensions and Retirement Planning pages. There will then come a time when you feel that you would like to retire and take benefit / income from these pension savings vehicles.

We describe this extremely important moment as ‘At Retirement’. The advice you receive at this time and the decisions you take, will affect the remainder of your life and the lives of your loved ones.

We believe that taking time to discuss the options available and the advantages and disadvantages of each option is time truly ‘well spent’. Checking the whole market to ensure you obtain the highest possible income is absolutely essential.

Most people take over 20 years, some take perhaps 40/50 years saving in preparation for their retirement. Sadly the greatest majority of people then make a decision on their route to pension income and pension lump sum in a matter of weeks. Often they simply take the pension income they are offered by their existing pension provider.

Many people who do so could be missing out on the best annuity rates and losing out on income up to 30% greater than the income they have chosen.

Taking At Retirement Advice will almost certainly provide advantages for you.

There are a number of alternatives you should always consider:

Open Market Option (for pension annuity and pension lump sum)

This term is used to describe the fact that you have a right to look across the whole market and ask a number of different insurance companies to tell you how much income they will provide from your pension ‘pot’. You can compare annuity rates across the whole market. You do not have to take your pension annuity from the provider with whom you have saved and who has your pension ‘pot’

You may be surprised to see how much the different offers of income vary across the market place.

We would strongly recommend that you ask us to investigate the Open Market Option for you, in order to get the very best annuity rate on offer.

Traditional Annuities

In this case you ‘purchase’ a fixed rate of income for the remainder of your life using your accumulated pension ‘pot’ of money. A spouses pension can also be inbuilt, as can guarantee periods (say 5 years for example). You can also index your income to say CPI/RPI so that it increases in line with inflation

Once an annuity is taken, the income produced is guaranteed, but they cannot be undone.

What you should bear in mind at this time, is that annuity rates are at an all time low.

The reason is that the yield on British Government Gilts is at an all time low, and the income produced from pension annuities is linked to these Gilt yields. That means that the income produced for every pound in your pension ‘pot’ is at an all time low.

You should therefore think very carefully before taking a pension annuity. If you lock into a pension annuity now and Gilt yields rise in the future, you will not be able to take advantage of that

Impaired Annuities

Impaired annuities are very similar to Traditional Annuities above in many respects, however they are offered to people who have suffered or who are suffering from an illness(s)

If you have an illness(s) or you have suffered illness(s) in your past, you may be entitled to an increased level of income (an enhanced annuity rate). The providers may ask you to complete a medical questionnaire and detail your past medical history (and reserve the right to consult your doctor/take a medical examination).

If the provider concludes that your illness(s) might mean that you have a shorter expectation of life than someone who has not experienced  illness(s), then they may be prepared to offer you an increased income.

As IFAs we can also work with the various providers and arrange it so that they improve their offers in certain circumstances. Essentially we would ask the insurers to bid against each other with a view to obtaining the very best income offer.

You may be surprised at how slight an illness is required to achieve impaired life basis and obtain more income via an enhanced annuity.

As an indication, we have in the past obtained increased pension income for our customers in cases where they were:

  • a smoker
  • someone who had high blood pressure which was controlled by medication
  • someone who was considered to overweight when compared to the ‘norm’

With Profit Annuities

In this case a pension income is provided which is linked to the growth in With Profit investments. The pension annuity is not guaranteed and depends on investment growth.

Great care should be taken before choosing this option. Advice from an IFA is vital to achieve full understanding and With profit Annuities would not be suitable for all customers.

Short Term (Fixed Term) Annuities

Short Term Annuities can be taken out with your pension ‘pot’ in order to potentially benefit from improved Gilt yields in the future and the improved income likely to go with them, via the remaining part of your pension ‘pot’.  There are various offerings from a number of providers. A guaranteed fixed income for a fixed period of time with a known guaranteed maturity value at the end of the term is one such offering.

There is some debate in financial circles, as to whether this option may be advantageous or not. The fact remains that British Govt Gilt yields are at an all time low, and thus the income produced from every pound in your pension ‘pot’ is at an all time low.

Certainly this is an option which should be discussed and considered before deciding just which route to take. Ask us for information on fixed/short term annuities.

After all, you are likely to have been saving to accumulate your pension ‘pot’ for many years and so it is correct that you consider all the options before deciding which is right for you.

So called ‘ New Wave’ …or … ‘3rd Way’ Products

These products sit somewhere between conventional annuities and Drawdown.  They originated in the USA and are now available in the UK. There are a number of providers offering these products and each product has its own unique features.

They offer the advantage of leaving the pension savings ‘pot’ invested but also provide guarantees in the form of either guaranteed minimum income levels or guaranteed capital values or in some cases both.

There are known costs for the income/capital guarantees and most allow the customer to exit the product and opt for a Traditional Annuity. The aim is to remain somewhat flexible whilst having the benefit of certain guarantees which are not available with Income Drawdown which is explained below

Please do ask us for details of these alternative products.

Pension Drawdown

Changes to legislation mean that it is no longer necessary to purchase an annuity at the age of 75 as was the case in the past. This changes everything!

Pensions drawdown (or unsecured pension as it is also known) allows you to release your pension lump sum and keep your pension ‘pot’ invested and take an income at the same time.

There are a number of rules to follow as with all pension activity.  There is no minimum income requirement (You can take no income if you so choose) There is however a maximum amount of income and this is set and re-set from time to time by the GAD (Government Actuaries Department)

In this case the income is very flexible but it is in no way guaranteed. In this respect the Drawdown pension option being discussed differs from the various annuity routes which in the main do provide a guaranteed income

Income Drawdown is generally suited to those people with pension ‘pots’ in excess of £100,000.

A phased Drawdown option is also available which allows you to utilise your pension ‘pot’ in tranches so as to gradually build up your pension income.

Drawdown can also be used to work with your Inheritance Tax mitigation strategy and allows a portion of your pension ‘pot’ to be passed on to your family after your death, subject to a tax charge which is currently 55%. Please ask us for details.

Talk to us:

We do not , in this text provide advice as to the suitability or otherwise of the various alternatives available to you At Retirement.

We do recommend that you meet with us and take time out to discuss the options and to ascertain just what each entails and if they might be used to your advantage.

You have probably spent years saving and preparing for retirement. Take time out now to make sure you take the right action and maximise both your income and if required, your flexibility.

Talk to us about what you want for your retirement . We will happily explain to you just how we would approach your requirements. Take advantage of our free, no obligation, At Retirement consultation. We think you will like our straightforward approach.

Complete the form at the top right of this page for a call-back or e-mail.  One of our experienced pensions and At Retirement advisors will make contact with you. Alternatively visit our contact page.

Alternatively, call us on 01482 863127