Lifetime ISAs allow retirement savings to grow tax-free. You can withdraw funds after age 60 to supplement retirement income. Either lump sum withdrawals or regular income can be taken. While not specifically designed for retirement income, LISAs provide an alternative way to save with tax benefits.
Risks and Rewards of Pension Annuities
Pension annuities can be advantageous due to the security that a guaranteed income for the rest of your life provides. They can also offer peace of mind, knowing that your income is secure no matter the financial market and fluctuating inflation.
Alternatively, there are risks associated with pension annuities, despite the guaranteed regular income. These should be considered before making the decision.
One of the main risks is that if you die earlier than expected, you may not get the full value of your pension pot back. Some annuities offer a guarantee period, ensuring that the annuity will be paid out for a certain number of years, even if you die within that period.
Another risk is the effect of inflation, as mentioned before. If inflation increases substantially, it could erode the buying power of your annuity income.
Role of Pension Annuity Advisors
Given the complexity and long-term nature of the decision to buy a pension annuity, many people seek the help of a financial adviser.
By consulting with a financial adviser, you can further understand the different types of annuities, the current annuity rates, and the best providers in the market.
A financial adviser can also enable you to fully consider all your retirement income options, such as pension drawdown, which could be a better choice for you.
They can help you to understand the tax implications of buying an annuity and assist with the application process, making it as smooth as possible.
Although using a financial adviser will involve a fee, it is likely worthwhile due to their breadth and depth of knowledge. They will offer invaluable guidance, when considering the long-term nature of the decision to buy an annuity.