I have been receiving lots of enquiries from people approaching retirement to ask what they should do now.
For me, it is still a question of risk versus certainty. If the Pension pot you have is able to provide you with a certain income for life that will be meaningful to you then an annuity might still be the best option. I don’t think it is a question of how big or small the pot is. If the annuity income makes up a large part of your retirement income then you may prefer the certainty of that to help keep you financially secure through retirement.
However, if you feel that the income your Pension pot could provide you with is merely supplementary to your other main income sources then it may be worth using this particular pot as a source of money that you can dip in to when you need it.
The temptation, and accusations against the Government’s recent decision, is that people will simply access their entire pot at once, because they now can. Again this is fine if it make sense for you. However, you must know your numbers. You must know whether that reduction in income you are taking by accessing your Pension at once is affordable for you.
At retirement you tend to feel like tidying things up and bringing them close to you. Being able to access your money all at once is therefore a real temptation. The danger is that 10 or 15 years down the line you may be in a position where you have spent that money and then have to live off less income for the rest of your life.
It is all a question of cashflow. As I mentioned above, if you know your numbers and have forecasted what your cashflow will be like through retirement then you can be more certain of making the right decision.