Meet Rick. Rick, 66, is single and lives on his own. He’s a keen cyclist, swimmer and keeps himself in good shape generally. He’s never smoked and, while he enjoys a glass of wine from time to time, he is conscious of what he eats and drinks. Rick’s parents are still alive and in their 90s.
Rick has a fund of £90,000 and is also receiving £12,000 a year in pensions mainly from the State, but including some small pensions from companies he worked for early in his career.
He’s heard that he can take his pension benefits entirely as cash and, like many people, is interested in this. His adviser, Brian, points out that the tax would be substantial if Rick takes all the money in one go. Rick could take the money out gradually, but Brian suggests Rick might be better off with an annuity. Rick hadn’t really considered an annuity as he’d heard they weren’t good value. Brian explains that when people assess the value of annuities, they tend to assume someone like Rick will die around 20 years after they retire. Rick’s adviser suggested that Rick could well spend 30 years in retirement, maybe even longer. He points out that there are currently over 13,000 people living in the UK who are aged 100 or more!
Although Rick was initially tempted to take the cash, Brian’s comments made him think twice and he decided to buy an annuity. As Rick continues to take good care of himself, he finds it reassuring to know that however long he lives he won’t have to worry about an income for life.