Taking a regular income
Mike wants a secure income
Status: Never married, no children
Occupation: Chartered Surveyor
Retirement savings: £60,000 in a personal pension plan, £15,000 a year from a final salary pension
Plans for the future: Stopping work – now!
Other income? My state pension kicks in when I'm 66
What I'd like to do with my retirement savings:
I want the security of a regular income for the rest of my life
Can Mike do it?
Yes. Mike can use his retirement savings to buy an annuity: it will pay him a regular income for the rest of his life – taxable at Mike's normal income tax rates – and will supplement the income he gets from his final salary pension.
If he wants to, Mike can take up to 25% of his retirement savings as tax-free cash (£15,000). This will reduce the amount he has to buy an annuity – so Mike will get a lower income than if he used the whole amount.
Mike has a of annuities to choose from. But once he's bought the annuity, Mike will not be able to change it.Think an annuity is right for you?
By the way..
- Mike might get a higher income by buying an 'enhanced' or 'impaired life' annuity, if he has certain health or lifestyle conditions that could affect how long he's likely to live. These may include smoking, regularly taking medication, being underweight or overweight, working in a hazardous occupation or if living in an area where life expectancy is lower.
- Mike should shop around (known as the Open Market Option) for his annuity to get a higher income for his circumstances – Mike's pension company may offer this service.
- If Mike wants to ensure his income , he can. But this may reduce the income he gets at the outset.
- It's unlikely that Mike would want his annuity income to continue to be paid after he dies as he is single with no children. However, he could set up his annuity so that some or all of his regular income could be paid to a partner or dependant for the rest of his life when he dies, this is called a joint life annuity. Or he could opt for a 'guaranteed period' which means his income will continue to be paid after his death up until the end of the guaranteed period. Mike just needs to nominate who he wants to receive it. If he does this, Mike's income will be lower when his annuity starts.
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