04 September 2019

Navigating the transition into retirement

Retirement used to be firmly established as the final chapter in our life story; education, work, retirement

This approach and the factors surrounding this period of time have changed significantly. Not only is the transition from work to retirement now a much more individual experience, but the course of retirement is less certain and very much a personal journey with changing objectives throughout.  

A guaranteed income for a set period of time, such as a fixed term annuity, could help you support your clients through a number of different stages in their personal retirement journey:

  • retiring early before any DB benefits start
  • anyone looking to only take tax-free cash and leave their funds in a safe environment
  • deciding to defer the state pension
  • consolidating investment gains and parking funds temporarily
  • those anticipating a change in circumstance before they commit to a lifetime annuity
  • clients looking to take their entire fund as cash, but wanting to minimise the tax they pay. 

This is a broad list of scenarios; we’ll now focus on one example where a fixed term, guaranteed income could support your clients. 

Bridging an income gap

Nowadays it can be difficult to spot where work ends and retirement begins. There is no set retirement date anymore, it’s often a gradual journey. There are now almost 1.3m people over 65 working in the UK1. That’s doubled from when these figures were first collected in 19922

Some people may be reducing to part-time hours to enjoy more leisure time, others moving to less demanding roles or leaving paid employment to start up a new business venture or volunteer. All of these steps often mean a reduction in salary, when your clients may still need the same level of income. 

A fixed term annuity could help your clients to bridge this income gap:

  • It gives security as it pays a guaranteed income for a set term chosen by your client, between 3 and 40 years.
  • It has no investment risk, so could be appealing for your more cautious clients.
  • It can provide a maturity value which can be included in future retirement plans, allowing your clients to  keep their future options open.
  • It provides some flexibility for if circumstances change and your client needs to access their money before the end of the plan. 

Although this scenario will trigger the Money Purchase Annual Allowance, for some clients it will still be a very viable option, offering a balance of security, control and more flexibility than you might think. 

A flexible approach to retirement planning

We can’t predict the future, but with our fixed term annuities your clients have the security of knowing that if their circumstances change, they do have options to access their money. 

They have a full surrender feature, so if needed there is the option to cash in the value of their plan. 

Our Fixed Term Retirement Plan offers more flexibility. If the guarantee payment period is selected for the full term, your client can make up to three withdrawals from the maturity value. This could be used for a variety of reasons, including if they need to make emergency repairs to their home or experience an unexpected life event. 

Fixed term annuities can be an effective way of navigating the changes that can occur over the course of a retirement. They offer security and control, and can be used as part of a flexible approach to retirement planning to produce good client outcomes. 

Find out more about our fixed term annuity products

View - Fixed term annuities 

Important information

Your client will have the option to take up to three withdrawals from the full maturity value if they have selected the guaranteed minimum payment period for the full term. This can be done at any time during the term of the plan, and must be a minimum withdrawal of £5,000 each time (income tax will be deducted). We’ll calculate the impact this has on their maturity value. The value of the underlying assets and interest rates at the time will affect this calculation. We’ll also deduct our administration and dealing costs.    

Fixed term annuities do not pay an income for life.

1Labour Market Statistics, ONS, February 2019

2Employment rate for people aged 65 and above, ONS, August 2019