ICEBERG

The 2015 pension freedoms changed the way we take income in retirement. No longer having to buy an annuity at retirement has increased flexibility enormously but the freedoms mean people now have to work out how best to make their pension last to avoid running out of money in retirement.

It goes without saying that your retirement income won’t last as long if you take a lot of money out of the pension pot early on. An income of £4,000 to £4,500 a year on a typical pension pot of £100,000 should be sustainable long into retirement. However, a factor is whether enough investment risk is being employed to generate growth over what could be a long period of time. It is also important to avoid excessive risk, as large losses early in retirement can have a very damaging impact on the sustainability of your income.

For most people, the right approach will be to aim for steady growth but to reduce risk by putting your money into a multi-asset fund that spreads investments across a broad range.

A drawdown pension gives you much greater flexibility than an annuity and offers a higher likelihood of having something of value left to pass on to beneficiaries. It’s vital to keep your finances under review.

Retirement is a journey. There are hidden dangers in choosing the right investment strategy and in deciding the appropriate level of income to draw out. A financial adviser will be able to conduct a regular assessment as to the sustainability of your retirement income. This will enable you to make any necessary adjustments in order to make the most of your pension benefits

 

Provided by Darryl Acton of Royal London

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