A good time to retire?

Since pension freedoms came along in 2016, we have much more choice when it comes to retirement.

We no longer have to use the money we save into a pension to buy an annuity. We can choose when we retire – state pension age need not dictate when we finally down tools.

At Continuum we are looking at whether the current recovery – and the boom that we all hope will follow – will be a good time to retire.

Has your pension pot suffered?

The crisis may have had serious effects on your wealth. Back in March 2020, the FTSE 100 dropped around 2000 points in under a month. As both workplace pensions and personal pensions are invested on the stock market, this meant that your pension pot may have suffered a serious fall.

Speak to us today

If you are concerned about your pension provider or the size of your pension pot, a good first move may be to contact us at Continuum for expert help and support. Find out more here.

The good news is that fall was probably short lived. The FTSE recovered and although even the most far-sighted investment manager could not have predicted the crisis, prudent management and shrewd investment should have protected you from the worst of the losses and already be taking advantage of the recovery.

Losses should have been minimised – but your pension may still have suffered some setbacks. If you are close to retirement, you need to have a clear view of exactly what is in your pension pot. Your pension provider can provide an illustration, but you might need the help of a Continuum expert to look at the figures with you to see what they really mean for your retirement plans.

How will you use your pension pot?

The traditional answer for pensions was an annuity. This involved giving your entire pension pot to an insurance company in return for an income for life. There was some scope to shop around for the best rate, but that was about the limit of the choices you had.

An alternative is drawdown, where your pension pot remains invested and hopefully will continue to grow, and where you can draw out as much as you wish each year. It is up to you how large your income is, although the more money you take out, the faster the pot will shrink.

Drawdown could be a more flexible, and possibly more rewarding way to use your pension pot.

Annuity or drawdown, what’s best for you?

Deciding on the best way to use your pension pot to maximise the returns you enjoy definitely requires expert advice. At Continuum we can provide it.

The recovery could mean that invested pension savings may continue to provide better returns, while an annuity – which will offer a fixed income – might be at risk from inflation as well as being restricted by low interest rates.

The answer that is right for you might be annuity, drawdown or even a combination of both.

You need expert independent advice to decide which.

A retirement strategy to take advantage of recovery

Recovery may change many of the assumptions that were behind your current pension plans, and if retirement is sight, expert help could be vital.

It could present new opportunities for you to make your pension savings work harder to provide the kind of income and lifestyle you want. You might decide to work for a few months longer to take full advantage of a booming market, or you might see that you have the funds you need to retire right away.

At Continuum we can develop  a retirement strategy starting with a full review of your existing pension arrangements, with projections, showing the kind of retirement income you might be able expect. We can also suggest ways to ensure that the recovery works for you.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable retirement strategy, you should seek independent financial advice before embarking on any course of action.

A pension is a long term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Pension income could also be affected by interest rates at the time benefits are taken.

The tax treatment of pensions in general and tax implications of pension withdrawals will be based on individual circumstances, tax legislation and regulation, which are subject to change in the future

Accessing pension benefits early may impact on levels of retirement income and your entitlement to certain means tested benefits. 

Accessing pension benefits is not suitable for everyone. You should seek advice to understand your options at retirement.

The value of an investment can go down as well as up.

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