‘Expect the unexpected’, or so the saying goes. And the previous two years have only strengthened this hypothesis.
The Covid-19 pandemic has proven to be a significant disruption for many people’s plans, from holidays and family reunions to career prospects – and the same can be said for people’s retirement strategies. After all, during the first wave of the virus, when the pandemic was at its height, research from My Pension Expert revealed that more than one eighth (13%) of individuals aged 40 to 67 were forced to delay their retirement as a direct result of the pandemic. Meanwhile, almost one in ten (9%) within this age group had to accept early retirement.
These figures highlight how unexpected events can force even the most organised retirement strategies to change at the drop of a hat. So, how can savers ensure that they can effectively adjust their retirement strategy without causing too much of a hindrance to their current lifestyle?
Alternative strategies
Thanks to the arrival of pension freedoms in 2015, savers have been granted greater autonomy over their pension savings and retirement strategies.
Prior to 2015, Britons all had to adopt the same retirement strategy: once they reached retirement age, they could take out 25% of their pension savings as a tax-free lump sum and use the remaining 75% to purchase an annuity. Whilst the security offered by an annuity, which offers a guaranteed income until they die, may suit some savers, the rigidity of such an offering simply will not suit the needs of others.
As such, following the introduction of pension freedoms, people have been able to access their pension savings once they reach the age of 55, allowing them to consider less traditional retirement strategies that suit their needs. For some, this may include investing in stocks and shares, whilst others may purchase property in the hopes that the prices will continue to rise and fund their retirement.
Whilst it is positive to see so many people considering alternative retirement strategies, however, the likes of property investment may present its own problems, as our executive chairman, Andrew Megson, has discussed at length in the likes of FT Adviser and Professional Paraplanner. Illiquidity makes it harder to access cash when savers need it most, and this may have proven particularly problematic to savers during the pandemic when they will have found themselves in need of instant cash to make ends meet.
As such, savers would be wise to consider a more flexible solution, which will allow them to access their savings as and when they need them: Flexible Access Drawdown.
Allowing for flexibility
Flexible-Access Drawdown is an invested retirement product, which allows savers access to their pension pot as and when they need it once they reach the age of 55. It gives people the power to decide how much income they receive from their pensions so they can take out more or less, as necessary. Further, it allows savers to leave the remainder of their pension invested, so it continues to grow as they receive their retirement income.
For many savers, such flexibility will be extremely welcome. It allows them to adjust the amount of income they receive in accordance with their financial circumstances – so individuals would have been able to access more of their funds if they faced a sudden change in employment status or a decline in regular income.
Whilst a strong retirement income option, it may not be suited to all savers, so people must consult an independent financial adviser, like our team at My Pension Expert, before making a final decision. Advisers will conduct a thorough assessment of a client’s financial circumstances, before deciding whether Flexible-Access Drawdown is the right fit.
Now, more than ever, flexibility is key to developing a sustainable retirement strategy – and Flexible-Access Drawdown could be the key to providing this and removing the stress from people’s retirement years.
For those curious to find out if they could be a suitable option for their retirement, download our latest guide here and make an appointment with one of our financial advisers. Doing so could certainly pave the way for a financially secure and stress-free retirement.