Short or long life expectancy
When making your decision, you should consider your spending needs for however long you think you’ll live. This can have quite an impact on how you choose to take your benefits and what you leave behind for any dependants.
Predictability or Flexibility
When making your decision, you need to consider whether you prefer the comfort of knowing that you will have a regular income or the flexibility to withdraw funds according to your needs.
Main source or part of your retirement income
If you have multiple sources of income that provide you with financial security, such as other Defined Benefit (Final Salary) pensions, you could take more risk with your Plan pension. If this is your main or only source of retirement income, you may want to be more cautious.
Security or opportunity
When making your decision, you need to think about the level of risk you are comfortable with as well as your ability or desire to manage any investments throughout your retirement. Whilst managing your investments may give you the opportunity to grow your retirement savings, they could fall in value too, plus you have to make time to manage the investments as well as pay ongoing investment & advice charges.
How much money is enough?
How much is enough to live on in retirement is an interesting question. Some of your costs will reduce, like not having to travel to work, but you’ll have more leisure time and will probably want to spend more on doing the things you enjoy.
The Pensions and Lifetime Savings Association (PLSA) publish the Retirement Living Standards to show what life in retirement could look like at three different income levels and what a range of common goods and services would cost at each. The amounts shown are yearly and before tax (Gross).
Minimum Retirement income
- If you’re single:
- £10,200 a year
- For a couple:
- £15,700 a year
Covers all your needs, with some left over for fun
Moderate Retirement income
- If you’re single:
- £20,200 a year
- For a couple:
- £29,100 a year
More financial security and flexibility
Comfortable Retirement income
- If you’re single:
- £33,000 a year
- For a couple:
- £47,500 a year
More financial freedom and some luxuries
These are just a bit of a starter for ten if you like, you can read more on the PLSA website: retirementlivingstandards.org.uk. If you fancy doing a bit of your own budget planning, you can try out the minimum income calculator: minimumincome.org.uk or the more in-depth budget planner from the MoneyHelper: moneyhelper.org.uk/en/everyday-money/budgeting/budget-planner
A financial adviser can help you to consider your income needs in retirement.
Please note: these amounts would fund this lifestyle for people living outside London. See the detailed information on the Retirement Living Standards website for more information.
How long might you live?
Knowing how long you might live is important in helping you know how long your retirement savings may need to last, especially if you’re considering the drawdown or cash options.
Did you know a typical 65-year-old, in good health, in September 2020 could expect to reach at least the ages of:
So, if you retire at age 65, you could live for at least 20 years after that (based on data from the Office of National Statistics). That’s 20 years of paying for the things you’ll need and want.
But we’re not all ‘typical’, it's possible you could live a shorter time or much longer than this. In fact, there’s at least a 3% chance a 65-year-old retiring now could live to 100 so they’d need to manage their money wisely!
Why not try out the Office for National Statistics life expectancy calculator: wtw.bz/UK-Life-Expectancy
Please note, external links and content (like the statistics above and this life expectancy calculator from the Office for National Statistics) are selected and reviewed when the page is published. However, the Trustee and Willis Towers Watson are not responsible for the content of external websites.
Protecting against inflation
Inflation is the increase in the cost of living. When there is inflation, the cost of goods and services you pay for increase. Continued increases in inflation over time affect how much the pound in your pocket is worth and what you can buy with it.
The Plan pension typically provides some protection against the effects of inflation.
If you transfer your pension out of the Plan, the level of inflation protection will depend on the option you choose. Some of the options will not have any inflation protection. For example, if you were to buy an annuity, you can choose whether or not it increases in value each year (you can learn more here).
If you choose the drawdown option or to take all of your transfer value as cash, it’s up to you to manage your money to ensure you can afford to buy the things you want and need in retirement before your savings run out. Having some idea of how long you may live can help with your planning, you can find out more about that here.
Your other pension savings
If you’ve worked at more places than just Howdens, the chances are you may have other pension savings in other pension plans. Now’s the time to dig through your paperwork and find out what you may be entitled to elsewhere, to give you a view of your total retirement income.
If you need help tracking down any old pensions, use the website here: gov.uk/find-pension-contact-details
Some example members
Here are a few examples of people who thought about how to pay for life after work. Each example member picked a different option, we’ll explore why and what their own priorities were. What they picked is colour coded just like the options throughout this site e.g. Plan pension, annuity, drawdown and cash.
These are just examples to help explain the different options. They should not be read as suggesting or indicating which particular option could be right for you.
Sally's choice
For Sally, a pension that could provide a regular income for life for her, and her husband Jim if she died first, and which provided protection against future increases in the costs of living gave her the peace-of-mind she needed. So, she decided not to transfer out and took the Plan pension.
Harold's choice
What was important to Harold was a regular income each month, similar to the Plan pension, but tailored to better suit his circumstances. Harold took financial advice and was recommended to transfer out of the Plan and buy an annuity from an insurance company.
Privani's choice
Privani wanted flexibility to take her money a bit at a time, changing how much she took and when. After taking financial advice and confirming that this was the right thing to do, she transferred out of the Plan and took Drawdown.
Privani is used to making investment decisions and knows about the ongoing investment charges. She has a guaranteed income, from other sources to meet her basic needs.
Ben's choice
As Ben had other retirement savings, which would provide him with more than sufficient income in retirement, he wanted to take this pension as a cash lump sum. So, after taking financial advice, he felt able to transfer out of the Plan, cash out and use the money, after tax.
