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Boosting income in retirement

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Forward planning is the key

Always compare quotes from different annuity providers. Never buy an income for life from the firm that managed your pension savings without first checking that it is competitive and appropriate for your situation.
Ensure that annuity or pension providers take into account anything affecting your health, from smoking to a serious heart condition, as you may qualify for higher payments from an ‘enhanced’ or ‘impaired-life’ annuity.

Weigh up the benefits of fixed annuity payments versus the cost of inflation-proofing your income with a rising, or index-linked, annuity.
If appropriate to your situation, consider taking a quarter of your pension fund as a tax-free lump sum and investing this sum in income-producing assets.
Use your Individual Savings Account (ISA) allowance to shelter currently up to £7,000 (2007/08) a year from income and capital gains tax. New ISA rules start for the 2008/09 tax year and will permit a new overall annual investment limit of £7,200.
If you move money into cash and fixed-interest investments as soon as you retire, you may still have several further decades left to live. So consider carefully if this is the most appropriate solution for your situation.
Benefit from tax relief on any further pension contributions, as a £100 contribution costs a basic-rate taxpayer only £78 and just £60 for a higher-rate taxpayer.
Where you have other income available to live on, consider leaving your pension fund invested for longer, as an unsecured pension.
Calculate whether to defer your state pension, especially if you continue working beyond the state pension age.
If appropriate to your situation, consider unlocking the wealth in your home using an equity-release scheme.

If you require any further information about the services that we provide or would like to review your financial planning position, pleasecontact us.

Levels and bases of, and reliefs from, taxation are subject to change.
Article date: 08.07

Last Updated ( Thursday, 08 November 2007 )

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