Options to Consider if You Have a Small Pension

If you’re beginning stages of retirement planning and wonder how you’ll manage with a small pension, consider alternatives.

13:00 23 February 2013

While you’re conducting your retirement planning, chances are you’ll be inundated with news of drawdown and various types of annuities. Drawdowns are recommended ideally for those who have a pension of at least £20,000 per year as well as an additional source of income. Some annuities require large sums of money up front. 

What if your pension is less than £18,000 a year though? Here are couple options to consider while you do your retirement planning:

 

1.It is possible that you may be able to take your pension as one lump sum. You can then invest that money as you see fit, or keep it in a savings. If you want something that yields a little bit more benefit, there are certain annuities you may be able to purchase with your lump sum to make sure you receive a guaranteed income for the rest of your life.

 

2.When your financial future is questionable, it’s understandable if you don’t want to put your entire pension into an annuity. There is no easy answer that works for everyone who’s planning their retirement. You may be able to stagger your annuity purchases over the course of a few years to allow yourself some extra “cushion” in your finances. No one knows what tomorrow will bring, so it might work best for you to start small and see how the investment works for you.

 

If you have been worried about retirement planning because you know you have a small pension, these options may give you opportunities you didn’t realize were available to you. It’s a good idea whenever possible to talk with a financial advisor who can help you get the most for your money.