Be Careful of the Impact of Inflation on Your Retirement

Building up a pension for your retirement may take many years and can involve short-term sacrifice for that long term peace of mind. Subsequently, when you come to retire, you want to make the most of that pension fund and see that it not only provides the best return possible but keeps on providing for the rest of your life. Remember however, thanks to medical advancements and lifestyle changes, this might be a very long time.

According to the Office of National Statistics, a man aged 65 is now predicted to live another 19 years; a female another 22. For a couple, the joint expectancy will be even longer – so you need to steer clear of simply taking the first or maybe the highest quote for a level pension without some thought. Over time , that might leave you a lot worse off.

Annuities do exist nevertheless, that will help safeguard against any inflationary effects. Known as ‘index-linked ‘, their return follows the RPI so that, as inflation rises, so does your income. Your income level may be lower initially over time , you may be assured its buying power will be sustained. This allows you to plan with assurance and protects you against any unanticipated inflation shocks.

For the more adventuresome, an investment-linked annuity could be an option. This provides income primarily based on the performance of a portfolio of shares, property and fixed interest securities. You take a gamble as the assets can fall as well as rise (so in a challenging period, your income could also fall) and they are consequently not right for everybody.

One other option that is becoming increasingly favoured when considering making an investment in a pension is the concept of having the ability to take an early pension release. The idea of being able to receive up to 25% of your complete allowance pot once you’re over 55 is certainly appealing. The great majority of people considering retirement imagine themselves taking long vacations and spending more time with friends and family. This tax free sum would help people to fulfill their dreams. Naturally, it is vital to think about each option open to you before any final decision is made.

We do stress that before you take any action regarding selecting an unsecured pension or taking an early pension lump sum that you carry out a comprehensive pension review with the assistance of a certified pension adviser.