Rebecca’s a healthy woman aged 65 with a £150,000 personal pension fund. Her husband Sean is 63 and although he plans on working for a couple more years he has very little in the way of private and state pension entitlement.
Rebecca currently receives a yearly pension income of around £15,000 from the State Pension and an ex-employer’s final salary scheme. Given Sean’s pension situation she’d prefer it if she could have around £3,000 a year extra income right now (£18,000 in total) to pay for life’s essentials (food, clothing, gas, electric) with Sean’s income on top.
She’s happy for some of her £150,000 to be used to secure that income but also wants the ability to dip into her savings for things like holidays, home repairs and emergencies. She is willing to take a little risk with her money but naturally errs on the conservative side.
Her financial adviser suggests that Rebecca takes out a Retirement Account and using her £150,000 investment she:
- buys a Guaranteed Annuity with £54,000 of her investment. This provides her with the extra £3,000 a year of secure lifetime income.
- uses the remaining £96,000 to invest in Pension Drawdown. With her adviser she chooses an investment fund that suits her more conservative attitude to risk and she has the freedom to dip into her investment whenever she wants.
Her adviser also explains that The Retirement Account is flexible enough to deal with their changing circumstances in retirement. So when Sean gives up work they may want to consider using more of her Pension Drawdown fund to secure more Guaranteed Annuity from her Account. They can review that at the time.
Finally she agreed to set up death benefits which would provide a money-back guarantee should she die earlier than she hopes!