30 May 2013

One approach to retirement income

People are beginning to understand that you can shop around for the best annuity for your pension money. But many haven't yet seen that there are other options than an annuity.
 
Those options include "income drawdown", where your pension money remains invested but you take an income from it up to the allowed limit.
 
But you can also combine different options.
 
Let's say, like many people, you don't want to stop work completely at 65 (or whenever) but intend to work a few days a week. In that case you could move your pension money into a drawdown scheme, and take a small income to replace some of your old salary. The invested money has a chance to grow further if you don't take too much income.
 
And when you stop work completely, you can either increase the income from the drawdown scheme, or use the pension money to buy an annuity. Who knows... perhaps annuity rates will have improved by then! Or (sorry to point this out), perhaps your health will not be quite as good and you will be entitled to an enhanced annuity.
 
Given that retirement might last a third of your life, it has some advantages to keep your options open.

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