Some things are great on their own, gin,tonic,apple pie,custard, but are even better when you put them together. No, not pizza and pineapple……
There are lots of great things about guaranteed income on its own.
- It keeps paying you an income, no matter how long you live
- It is not affected by how markets change, it just keeps paying you that same income
- You don’t have to think about it again, you buy it and it just gets paid each month
Equally, there are many great things about (non-guaranteed) drawdown income
- It is completely flexible, you can take it however you wish
- It is linked to your pension’s investments, so if they do well, you may be able to take more money (although of course, they may also do poorly)
- You can pass on whatever you don’t end up taking over your own lifetime, subject to tax rules
Putting guaranteed and non guaranteed income together may give you the best of both worlds!
Some things have limitations on their own and work best in combination. Drawdown income involves more risk to manage and guaranteed income is not very flexible. Relying solely on one, or the other, may not be ideal for most people. However, combining both may give the best of both worlds for many.
So how do you mix them together?
Up until now you needed to take some of your pot and buy what was called an “annuity” separately. This paid a guaranteed income directly to you. The pot you had left could then be used to take a separate drawdown income from.
Now, with some newer products, the guaranteed income can be bought and just paid straight into your pot. This means you can take it as income if needed at the time, or just leave it invested in your pot until it’s required. Including some guaranteed income can help build a more sustainable retirement income plan.
Sounds good, how can I work out what’s the right mix?
No-one wants a small pie drowning in custard, too weak a G&T, or even one bit of pineapple anywhere near a pizza…. but anyway what’s the right mix here.
Not unsurprisingly it depends on many things and that’s where Guiide can help.
How? Well you can add some guaranteed income to your Guiide plan and see if it is still expected to work with lower risk. You can also see how it effects the other outcomes that we show, such as if you live longer, or if there is a market crash.
From the end of October 2022, in our main planning journey, with just one click you can add some guaranteed income, (25% of your pot total, which may be a typical amount), from the age you plan to retire (or next year if you have already retired). We use some estimated market rates, to show you what happens.
Next year, it will be possible to get live actual quotes and purchase some guaranteed income if desired. In the meantime, when we launch our Dashboard, Track and Help page very shortly, you will be able to alter this 25% amount (and also alter any age you want it from), then see how what may happen.
By looking at this, you can then consider what the right mix may be for you as part of your overall plan.
Guaranteed income rates have also shot up in recent months!
Adding guaranteed income into our planning tools, has by chance, co-incided with some favourable changes in its pricing.
You may have seen that the cost of Government borrowing (and unfortunately other borrowing, such as all our mortgages) have risen a lot recently. This is bad news. But, when the costs of Government borrowing goes up, the price of buying some guaranteed income comes down. This is at least some good news.
This means the rates at which you can buy guaranteed income are far cheaper than they have been for many (10+) years. It’s one silver lining in the current financial issues for retirees.
The illustrated rates we use in our calculations reflect up to date prices, so visit our main site and see if adding some guaranteed income means your Guiide plan would still be expected to work, but with the added benefit of reducing the risk of running out of money with a more sustainable plan.
If you may be interested in purchasing some guaranteed income it will only be available directly later this year within our Guiide.auto product with Penfold, which we have recently launched. Details below.
- Anyone can transfer their pension pots to Penfold via our site and use Guiide.auto.
- When you retire at some point in future, your final confirmed Guiide plan will be paid automatically, until you say otherwise.
- You no longer have to think about how much to take from month to month, it just gets paid.
- Where you have pensions and savings your Guiide plan will reduce the income tax paid, without lots of complex tax planning on your part.
- We help you track your remaining pension pots and long term plan over time in our Dashboard and Track page, so you don’t run out of money .
- You can get ad hoc withdrawals tax efficiently, on top of your planned payments, if you need more money in any month.
- Once retired, you can buy some lifetime guaranteed income easily via Guiide, if ever wanted
If this sounds good, then go to Guiide, build a plan and check out Guiide.auto in our new Dashboard feature.
