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Countdown to Retirement
The twelve months leading up to retirement can be quite hectic, and there are a number of decisions that you will need to make in order to make the most of your retirement options.
12 months to go
Time to start making detailed plans about your retirement. Will you be stopping work completely or working part time? Will you have finished paying off your mortgage and cleared your debts? Will you be remaining in your home, or do you have plans to move?
6 months to go
At around this point, your pension provider will write to you* confirming the date at which you want to retire and the value of your current pension fund. If you have saved into more than one pension you may receive a number of letters from different providers so you’ll probably need to sit down and do a few sums to work out what this means collectively. You could start talking to your financial adviser about the options available to you.
You’ll need to consider if you wish to take a tax free lump sum from your pension (now known as the Pension Commencement Lump Sum) and whether or not you defer taking your pension and for how long.
*Exactly when your pension provider writes to you will be based on the date they expect you to retire – this could be either the date you gave when you took out the policy or any date you may have subsequently communicated to them. It might not be the right date for you now.
3 months to go
At around 3 months before your expected retirement date your pension providers will write to you once again. They will outline the annuity – that’s the income for life – they are prepared to pay you for the pension you have with them. Many providers have minimum threshold levels in place where they will either not offer you an annuity, or if they do, it won’t necessarily be the most competitive. It is worth considering whether you should consolidate all your pension pots together to receive a more competitive annuity. You should also consider using the Open Market Option – in other words, shopping around a range of other providers for the best rate.
Where you have a health or lifestyle condition that might affect the length of time you may live, your income can increase considerably – and that could be the difference between a comfortable retirement and a difficult one. So you can find out now whether you might qualify for an enhanced annuity.
At the point at which you retire, you should have made these decisions and chosen to either defer receiving your annuity income, or you will have gone ahead and made your purchase.
You may or may not be in receipt of your state pension depending on the age at which you retire, but you should now have a clear idea of the income you are going to receive in retirement.