Freedom factor 5: Mix and match

In our freedom factor series, we’ve covered a number of options for taking your retirement benefits – guaranteed income, adjustable income and taking cash. Now it’s time to look at mixing and matching the options to suit you.

Before you unlock this option, there’s a lot to think about, and you may want to consider taking guidance or advice. We can help with this. Read on!

There are potentially several ways to mix and match your retirement income optionsFor example, you could: 

• take tax-free cash and an adjustable income for some years, and then buy an annuity in later life
• buy an annuity with some of your pension pot and take the rest as adjustable income, or
• take some cash, leave the rest of your pot untouched for a while, then buy an annuity or take an adjustable income.

These are just examples. It all depends on you, your personal circumstances and how much you’ve got in your pension pot. 

Three feel good factors of mixing and matching

  ✔️ Completely tailored to you

You can have a retirement income that fits you and your circumstances. 

  ✔️ Can be flexible if your needs change over time

For example, you might want a higher income to start with, then a lower income when you start to draw your State Pension. Or a lower income now with the potential for a higher income in the future to cover medical and care expenses.

  ✔️ You might feel like it gives you more protection

If you’re a cautious kind of person, you might be happier with a ‘blended’ retirement income that balances the potential investment growth from a drawdown arrangement, with more protection for your money as you get older (from an annuity, for example).

Three not-so-good factors of mixing and matching

   ❌ It only really works for bigger pension pots

If you’ve got a few smaller pension pots, you might think about bringing them together (known as ‘consolidation’), so that you have a bigger pot to play with. But, it’s worth checking first if any of your pensions have guarantees you’d lose if you transfer them out. Have a look at consideration 3 – consolidation.

   ❌ It can get complicated

There’s more to manage and consider for you and your loved ones, including income, pension and inheritance tax. 

   ❌ It could be expensive

There might be several sets of charges involved from different providers, and you’ll almost certainly need to take financial advice. Fortunately, we can help with that. 

Five good reasons for getting help from an expert

   👍 Avoid getting bogged down 

Choice is good, but it can also be bewildering – and some of the options are difficult to compare because they work in different ways. An expert can help you make sense of all the options. 

   👍 Take your situation into account

There’s no such thing as a ‘one-size-fits-all’ retirement. An expert can look objectively at your situation to see which options might be more suitable for you.

   👍 Get better value

You don’t have to take what your current provider offers. An expert who knows the market can help you shop around to get a good deal.

   👍 Find things you hadn’t thought of

This is especially true for the ‘mix and match’ option. An expert who’s familiar with the pension freedoms could suggest combining them in ways you hadn’t thought of.

   👍 Avoid costly mistakes

You can’t change some of the options once you’ve taken them. An expert can help you make decisions you won’t regret.

Guidance or advice?