What to know about an investment in your future

Retirement may not be right around the corner, but now is the time to start planning for success.

08:40 11 September 2013

Planning for retirement could involve anything from setting up a couple different Independent Savings Accounts, to an entirely different investment like an annuity. The part that may be the most confusing to people is what options are actually available. While there are certain choices that must be made, but the good news is that the UK allows people to select their own company for annuities and whether or not they want to do a drawdown scheme instead. Here are a few things to keep in mind.

What you should know about drawdown:

• Drawdown requires that you already have a pension that gives you a secure monthly amount, and even investment income doesn’t do the trick. If you have at least £20,000 annually in pension income or annuities.

 

• You can decide to put your funds into an annuity at any time with a drawdown choice. When you choose an annuity to begin with, that investment is fixed and cannot be changed afterward to a drawdown option.

The takeaway:

• Your best bet may be an investment income, an annuity, and a drawdown option. Drawdown leaves you flexibility to overcome factors such as inflation or sudden economic shifts where some annuities do not.

 

• If you are not sure what to do you can choose the drawdown option safely without worrying because you can always shift to an annuity later. As long as you have that £20,000 annual pension pot, you have a little bit more freedom in choice.

 

• If you haven’t enrolled in an employer match pension fund already, do so as soon as possible. Those funds will all add up and it’s much better to be safe than sorry when it turns out that inflation has created an economic nightmare that your initial investment cannot adequately survive. Remember that the cost of everything increases as you age, including medical related expenses.