Building a retirement fund is usually the result of a lifetimes’ effort; it therefore is appropriate that as much thought be given to the management of such funds when they become available. Most schemes allow the taking of a tax free cash sum; in the vast majority of cases this should be taken, even if funding for income, because it should be more tax efficient to invest elsewhere and some control is maintained over some of the capital. The residual funds are then used to purchase an income known as an annuity. Annuity rates in the UK are linked to the return on medium term gilts. At present these are producing low returns and hence annuity rates are at a long term low. It therefore follows that annuity purchase now is yielding low incomes and that more capital is required to produce a given income. Also; once an annuity is purchased, the money has been spent and income ceases on the death of the annuitant/s.

There is an alternative to this scenario which offers deferment of this stark choice whilst allowing control over income and investment. The two approaches are by way of Phased Retirement and Income Drawdown.