“It’s important to remember that if someone is eligible for the full new state pension, this will represent a guaranteed income of £10,637 per year, currently increasing in line with the triple lock. If both people in a couple have the full new state pension, this will total £21,274 a year of guaranteed income, and this may be sufficient for many couples.”
So, a mixed strategy can be valuable for some clients.
Claire Altman, managing director – individual retirement at Standard Life, says the freedom and flexibility of drawdown will always be an attractive option for those who feel ready to access their pension savings.
However, the concerns many clients have about their future are increasing the demand for solutions that can offer greater financial certainty in retirement.
She adds: "It’s therefore creating a need to show people how they can enjoy the best of both. But, if we’re to truly crack this, we need to innovate. This means finding ways to make it easy for people to manage a blended income solution in retirement, and avoid those ongoing decisions that come dressed in overalls and look like hard work.
"Ultimately, we have to accept that as an industry we bear a greater responsibility to come up with hassle-free solutions that can not only give people what they want, but can also deliver a decent life in retirement."
Combining the certainty of annuities with the flexibility of drawdowns allows clients to adapt their income according to changing needs throughout retirement.
“However, fear and a lack of understanding of financial markets are still likely the biggest reasons for the purchase of annuities,” notes Dominic James Murray, chief executive of Cameron James.
“I think all clients should take themselves through a proper research and education process before purchasing an annuity. Read the pros and cons. And reach out to a qualified IFA to ask them what alternatives are available. That way, clients who choose or forgo annuities are making a much more informed decision.”
Spencer adds: “Often we advise on a blended approach for clients to ensure they have enough income to cover the essential costs, but also have some flexibility should their circumstances change in the future.
“This often leaves clients with the peace of mind that they have enough income to pay their bills and food costs, but they can also have funds in the background invested in the markets for potential long-term growth.
