Not taking pension advice? You could lose up to 60% retirement income

As you approach retirement and consider income options you may think about purchasing an annuity. They offer security as you will know how much money you will receive for the rest of your life, but they are not very flexible.

In addition, research conducted by the Financial Conduct Authority (FCA) found that 80% of people who purchased an annuity from their current provider could have received a better deal elsewhere. Some people could have received up to 60% more income if they had shopped around.

This is why it is important to take pension advice, which can help you avoid such a costly mistake by explaining all of your options and conducting a whole of market review to find you the best deal.

Think about what more retirement income could mean for you. Would you clear debt or maybe even go on regular holidays? This extra income could free up money to maintain a more comfortable lifestyle throughout your retirement.

Understanding the income options that are available to you can help you create such opportunities and make the most of your pension.

Purchasing an annuity

You can sell either part or all of your pension pot in exchange for a guaranteed income for life. However, you do not have to accept the quote that your current provider offers you. Many people shop around to find the best car insurance quote or seek out the best value for money holiday deals, and should do the same when it comes to buying an annuity.

A better deal, in some circumstances, could mean a difference of 60% income, as shown in the graph above. Could you afford not to take pension advice if it meant losing out on an extra 60% retirement income? Annuities are typically irreversible so this is not a decision to be made lightly.

Guaranteed income products

A number of new retirement products have opened up more opportunities to pension savers. These products offer insurance to protect against unpredictable occurrences such as stock market crashes.  

Have you ever considered what a crash in the stock market could mean for your retirement income? What if it wiped 40% off the value of your pension?

Guaranteed income products are designed to protect your pension income from unexpected losses. A serious crash in the immediate approach to retirement could wipe thousands of pounds off the value of your fund, and without the insurance that a guaranteed income product brings, you could be worse off in retirement. 

Pension drawdown

With pension drawdown you retain ownership of your fund and it remains invested in the hope that it will continue to grow. You can withdraw as much or as little as you like whenever you need it. This option can give you flexibility and control over your finances.

However, the money you withdraw, after taking your tax-free cash, is considered taxable income and as such could push you into a higher income tax bracket. It is therefore important to be aware of how much tax you could pay on withdrawals to avoid losing large amounts of your savings to the taxman, and you may be able to significantly reduce your tax bill by withdrawing smaller amounts of money over a period of time*.

There is also a risk that you could deplete your fund too early and not have enough income to last throughout your retirement, so it is essential to seek regulated financial advice to find out if this option is suitable for you.

There are more possibilities for your later life income than ever before. So many choices can make it confusing, so it is a good idea to seek professional pension advice before making a decision.  

Do not miss out on thousands of pounds for your retirement by leaving it to chance! Talk to us for advice based on your individual circumstances.


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Important Information

Tax treatment depends on your individual circumstances and may be subject to change in future.

The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date, but could be out-of-date by the time you read the article. For our latest information and news, please see our articles section:

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