Rebecca’s aged 65, married, with a £150,000 personal pension fund.
Rebecca receives pension income of around £17,500 from the State Pension and an ex employer’s final salary scheme.
She would like £2,500 a year guaranteed income (£20,000 in total) to pay for life’s essentials and an extra £3,000 income on top to help with holidays and nice to haves.
Her financial adviser suggests that Rebecca takes out a Retirement Account and using her £150,000 investment she:
- buys a Guaranteed Annuity with £55,000 of her investment. This provides her with the extra £2,500 a year of secure lifetime income.
- uses the remaining £95,000 to invest in Pension Drawdown taking £3,000 income. With her adviser she chooses an investment fund that suits her conservative attitude to risk. She hopes that her Pension Drawdown funds will grow over time.
Her adviser explains that The Retirement Account is flexible enough to deal with changing circumstances in retirement. Her husband will give up work in the next few years and has very little in the way of pension savings so she may want to consider using more of her Pension Drawdown fund to secure additional Guaranteed income at that point.
Finally she agreed to set up death benefits which would provide an income guarantee should she die earlier than she hopes!