Using a mix of secure and flexible income in retirement to match your needs
A mix and match approach could help you find the right balance between security and flexibility in retirement.
Annuities provide a secure income that will continue to be paid for the rest of your life. You can choose for the income to continue to your spouse or partner after you die so you know they are taken care of. However, annuities don’t offer flexibility - once set up they usually can’t be amended.
Drawdown offers a more flexible option. It allows you to amend your income when needed. It also gives the potential for an increasing income depending on how your investments perform. It is a higher risk option than an annuity because your income is not guaranteed. You could run out of money if your investments perform badly, you take too much out or you live longer than expected.
Having some secure income from an annuity could cover your essential spending costs, whilst the flexibility of drawdown could be used for the retirement nice-to-haves.
What is the Retirement Planner?
Our interactive tool shows the income you could receive by purchasing an annuity and accessing some of your pension through drawdown.
How to create your plan
Enter your details and choose how much secure and flexible income you want to receive. The Retirement Planner then uses best buy annuity rates to give you an idea of how much of your pension might be needed to purchase the secure income. It also estimates how long your flexible income could last.
You can adjust the amount of secure and flexible income to find a plan that works for you.
Once you’re happy with your choices you can get guaranteed annuity rates from across the market and confirm your drawdown details to receive your free personalised drawdown illustration. Please note annuity rates change regularly and may go up or down in the future. Quotes are only guaranteed for a limited amount of time.
Client case study: using a mix of secure and flexible income
I'm happy I took a mix-and-match approach because it gives me the best of both worlds – secure income with my annuity and variable income with flexibility and a chance of some investment returns from drawdown.
MR NEEDHAM, Cheshire
After 23 years as a sales manager for a manufacturing company, I decided to retire to explore other opportunities available to me. I took a lot of time considering my options. In retirement I wanted to make sure I had secure income to match essential bills but still had some flexibility. That’s why I decided to use a mix of options to achieve both secure and variable income.
For the secure income I will have my state pension when I'm 66, but to top this up I decided to buy an annuity. By just providing them with a few details, Hargreaves Lansdown searched the whole market for a rate, and found one 30% higher than my previous provider was offering. This extra income is paid to me for life so it was definitely worthwhile.
The attraction of drawdown was its flexibility. I'm currently drawing enough each year to manage my tax liability. I can increase or decrease how much I take when my circumstances change. I used Hargreaves Lansdown's research to help me choose where to invest and it's really easy to monitor my account online. The income could go down but that's why I have secure income to fall back on. I can afford to take a bit more risk with drawdown as I have the safety net of my annuity and my future state pension, both paying me a guaranteed income each month.
- Ensure you fully understand your options.
Drawdown in the HL SIPP is offered without advice as standard. If you are at all uncertain, we strongly recommend you contact us for financial advice. You should carefully consider your overall financial circumstances and other retirement goals or plans when making your decision.
- Check you won't lose out by transferring.
Before applying for your annuity or drawdown plan, check the rate offered by your existing provider to make sure you are better off and won't lose any guarantees by moving to a different provider. By moving, you will lose any entitlement to these.
- If you are married or have a partner, you should strongly consider making provision for them in your plans, so they receive an income if you die first.
- Consider the charges you might pay.
Most investments carry charges, and the income you ultimately receive depends on the returns from investments, less any charges. Therefore it is important you consider the charges of your drawdown plan and associated investments, as well as the charges for any of the other options you are considering.
See charges of the HL SIPP