Retirement Income Planning – Not as Complicated as You Might Think

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Although it may seem like a minefield of information which is often hard to understand in simple terms, planning your retirement income does not have to seem such a daunting prospect that you want to it put off for as long as possible. In fact, the earlier you sit down and take care of your future financial needs the better because it means you can then relax having the peace of mind that everything is set and in place for when you retire.

Calculating your retirement is very important

Calculating your retirement is very important

What Happens Just Before You Retire

Just before you take your retirement, your pension provider should send you an information pack which outlines the amount you have in your pension fund and the “anticipated” value of it. Included in this information should be a detailed quote on the annuity they are prepared to offer which will detail just how much you would receive as an annual income from them.

It is at this stage that you have the opportunity to check out what you might receive if you shop around so you get the maximum amount when it comes to your annual retirement income. You would be able to see which annuity provider is currently offering the best deals and if they suit your personal retirement needs.

There are certain things you can do which may affect the amount of retirement income you receive from an annuity. This includes having a health check because you may just be eligible for what is known as an “enhanced” annuity which in short, might mean you end up more comfortably off when you retire. The thing to bear in mind is that an annuity has to be seen as a major investment and it’s one that is going to affect the rest of your life.

Retirement nest eggs, very re-assuring

Retirement nest eggs, very re-assuring

Are There Any Alternatives to Annuities

There are a few options other than buying an annuity available to you when it comes to investing your pension. You may prefer not to buy an annuity because the annuity rates are low and you think they may rise a little further down the line. If this is the case, then you should consider the following:

Buying an Investment Linked Annuity

These are investments which involve stocks and shares. They are a popular choice as they help reduce the risk of inflation eating away at your pension fund which in turn means you protect the value of your annuity. The aim of an investment linked annuity is to increase the amount of income you receive during your retirement years.

However, there are more risks involved because if your investment does not perform as well as you had hoped, then instead of receiving more income from your annuity, you might end up with less. As such, you have to expect your retirement income to fluctuate which means you may want to have another source of income to tide you over the leaner times.

Consider Phased Retirement

You do have the option to phase your retirement over a chosen period of time rather than convert the whole of your pension into one annuity in one go. You are allowed to withdraw money in tax-free lump sums which permits you to put aside money that will provide you with an income by way of an annuity purchase or indeed Unsecured Pension. If you decide to go down this route you can benefit from any changes in annuity rates as well as preserve any funds before you actually retire.

Think About an Unsecured Pension

As an alternative to purchasing a lifetime annuity, an Unsecured Pension lets you invest the money you have in your pension fund but at the same time you can withdraw from it to provide an income. However, there are government limits as to how much a person can draw and you do run the risk of having to pay more for an annuity in the future which might mean you end up worse off.


Buying an annuity makes things a lot less complicated than choosing any alternatives which can often be much more complex and which also have risks attached to them. If you have any concerns or doubts about planning your retirement income, you’d be well advised to seek professional help from an independent source so you invest your pension fund wisely. This in turn means you’ll enjoy financial security in your retirement years.


Image credits: Professionals WA/NT and Premier Financial Planning IFA Bath