Retirement Routes: Mix your options

Over the past few weeks, we’ve explored a variety of ways you can use your retirement savings. There’s the option to get a steady pay check every month (an annuity), choosing a plan that lets you decide how much money you take out and when (drawdown), or simply cashing in parts of your pension pot whenever you need to.

But what if you don’t have to pick just one? You could actually mix and match these options to create a retirement plan that’s as unique as you are.

However, blending these choices isn’t as simple as making a smoothie. There are a lot of things to consider to make sure you’re setting yourself up for the kind of retirement you really want. Plus, it’s a good idea to talk to an expert when it comes to retirement planning. Keep reading to learn more about why talking it through and getting financial advice could be one of your smartest moves.

In this blog:

• What does it mean to mix your options?
• Advantages of mixing your options,
• Considerations before mixing options, and
• Support on your journey.

What does it mean to mix your options?

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

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

These are just some examples. The way in which you mix your options depends on you, your personal circumstances, and how much you’ve got in your pension pot.

Advantages of mixing your options

Made just for you
Your retirement income can be customised to perfectly suit your lifestyle and financial situation. It’s like having a tailor-made suit, but for your finances during retirement.

Adapts with you
Life changes and so do your financial needs. Imagine starting with a higher income to enjoy your early retirement years to the fullest, then adjusting to a lower income once your State Pension kicks in. Or maybe you need a modest income now but want the option to increase it later for unexpected expenses like health care. It’s all about having the flexibility to adapt your retirement income as your life evolves.

Extra peace of mind
For those who prefer playing it safe, there’s an option that could make you feel more secure. Think of it as a safety net for your retirement funds. By blending different types of retirement income – some that offer the chance for growth (like drawdown) and others than provide a guaranteed income (like an annuity) – you can enjoy the best of both worlds. This balanced approach means you can potentially see your savings grow while also having a reliable income stream as you age.

Considerations before mixing options

Works best with bigger pension pots
Think of your pension like a jigsaw puzzle. If you have lots of small pieces (or smaller pension pots), it might make sense to put them together to create a bigger picture (a larger pension pot). This way, you can have more control and potentially more options for your retirement income. However, be careful before you move things around. Some of your pots might have special benefits that you could lose if you transfer them, so it’s important to check first.

Can be a bit tricky
Managing your retirement income isn’t always straightforward. There’s quite a bit to keep an eye on, not just for you, but for your family too. This includes figuring out how much money you’ll get, understanding how pensions affect taxes, and even planning what happens to your money after you’ve gone. It’s a lot to think about, but you don’t have to do it alone.

Might cost you
When it comes to managing multiple pensions or considering different retirement options, you might find there are several fees or charges from different companies. On top of this, getting professional financial advice to make the best decisions for your situation is pretty much essential – but it doesn’t come free. The good news is, help is available, and getting the right advice can actually save you money in the long run by helping you make smarter choices.

Support on your journey

While mixing your options offers flexibility and control over your retirement income, it comes with its own set of responsibilities and risks. It’s important to approach these challenges with caution and, where possible, seek professional advice to help navigate the journey. 

Guidance
Pension Potential, a service from Punter Southall, can help you explore how the different retirement options work. It can show you:

• how long a flexible income could last for you, and how different levels of income and investment growth could affect this,
• what kind of income you could get from an annuity, and
• different options for taking cash and how much tax you could pay.

Just fill in the short form on the Pension Potential hub to download a free, personalised pack and explore the different ways to take your retirement benefits.

Alternatively, you can get guidance about the different ways to take DC retirement savings through Pension Wise. If you’re aged 50 or over, you can book a free guidance call.

Advice

Mixing your options can be complicated and expensive.

• You’ll need to decide how much of your pension pot to allocate to each option.
• Depending on which options you want, you may need to choose investments.
• You should shop around to find what’s best for you – you don’t have to stay with your current pension provider. There might be several sets of charges from different providers.

Individual financial advice is available through Foster Denovo, the parent company of Secondsight and Aspire to Retire.

>You can contact the team by calling 0330 332 7866, or by emailing advise-me@fosterdenovo.com. Foster Denovo will explain any fees clearly in advance.

You can also find more information on getting guidance and advice on our ‘Help and support’ page.

Join us next week as we look at timing and deciding if you’re ready to take your retirement benefits.