The ream of new pension options due next year will give those heading towards retirement more choice than ever before. But while this means that retirees will have more freedom, it also means that they have more responsibility to make the right choice. And the right choice, it seems, is to take a balanced approach.
According to Aviva's Good Retirement Choices report, a mix of retirement solutions is the safest bet for a happy and comfortable retirement. The report looked at the performance of annuities and income drawdown purchased in 1999, 2004 and 2009, and found that neither could be predicted to offer the best financial outcomes. As a result, incorporating both annuities and income drawdown into a retirement plan was deemed to be the safest way to balance risk with desired income.
Clive Bolton, Aviva's managing director of retirement solutions, explains: "It's clear that no single product, whether it is an annuity or income drawdown, can offer a cast-iron assurance that it will out-perform all other retirement solutions. For that reason, people should take advice where possible, and be realistic about how much money they need for the remainder of their lives."
Getting advice when mapping out a retirement plan has long been recommended, but with added pension freedoms and the need for balanced retirement solutions, the need for expert advice has never been greater.
A recent consumer survey carried out by Baring Asset Management (Barings) found that people were turning to a number of avenues to get advice, with independent financial advisors (IFAs) ranking as the most popular.
According to the figures, 26% of those surveyed said that they would turn to IFAs for advice on their retirement options, an increase of 5% from 2013. However, almost one in 10 people (9%) said that they would turn to their employers for advice, up from 7% last year.
According to Rod Aldridge, head of UK wholesale distribution at Barings, this is "unsurprising" due to the process of auto-enrolment, and it indicates that the workplace is likely to increase in relevance for retirement planning in the future.
However, while many people are seeking expert advice, some are relying on less professional routes. The survey also highlighted that around one in seven people (16%) still preferred to consult family and friends, while one in five (20%) admitted that they do all their financial planning themselves. This could put people at risk of poor retirement decisions, which may result in a smaller than expected income during retirement.
More choice can make it tricky to pin down a good financial plan, so if you're heading towards retirement, getting expert advice is key. As Rod Alridge points out, "retirement planning is so important for our future wellbeing and peace of mind", so getting informed about all the options now is the best way to ensure a happy retirement.
Independent advice is the gold-standard, but you can also talk to your employer, bank, building society or pension provider. You can also take a look at our online annuity planner to start exploring your options.
As well as annuities and income drawdown, you may want to consider equity release. You can find out more about this option by calling our equity release advice centre. A healthy savings pot is also a valuable income stream for a lot of retirees, so make sure yours is working as hard as possible by finding the best home for your money. Check out our savings deals to find the right account for you.
Whatever options you decide upon, try to get as much information as you can, and then you can sit back and start to enjoy your work-free years safe in the knowledge that your future will be provided for.
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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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