8 July 2011

Don't Use Your Pension Money...

...without thinking about it!

I have been looking in more detail at the various options available to take a pension income in retirement from a "money purchase" (or "defined contribution") pension. Although the majority of people buy a lifetime annuity there are certainly other options to consider.

The option I have been revisiting is known as "temporary annuities" (or "fixed term annuities"). Instead of paying an income for life these products pay an income for a fixed term - perhaps 5 years. At the end of the term you will get back a sum of money (normally a guaranteed amount) which can be used to buy a further annuity, for instance.

Apart from any other benefits of flexibility it means that if your health has deteriorated you may be entitled to an "impaired life" annuity which will give you a higher income.

Given the time that we are all likely to spend in retirement, it is well worth keeping as flexible as you can be to take account of changing circumstances.

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