Imagine if you will, that tomorrow morning, you had to make a definitive decision about the rest of your life. A one-off decision that ‘controlled’ and defined your income until the day that you die!

This is exactly what Defined Benefit (Final Salary) pension schemes require you to do. Not a concept that sits comfortably in the modern world. That said, the income is guaranteed and inflation proofed (within limits) for both yourself and your spouse for the rest of your lives.

However, imagine that you had the choice of replacing this secure but inflexible retirement income with a retirement fund that gave you control; to have what you like when you like but with no underlying guarantee.

As always, the more choice we have the more difficult the decision.

How about we throw in the fact that with the guaranteed choice, should you and your spouse pass away prematurely, the value of this pension is lost with nothing to benefit your heirs?

Now compare that with the nil guarantee option where any unused fund can be left to a beneficiary of your choosing.

Is the choice getting any easier?

Then there is the opportunity to release capital from the unsecured option should you require it, unlike the secure option. But then the unsecured option leaves you at the mercy of stock markets, which could be a positive or a negative.

None the wiser? Give up?

If you are one of the lucky minority who still has final salary pension benefits, don’t despair. The majority would love to have to grapple with these conflicting options. And help is at hand.

We have advised many such clients on how best to structure their retirement, particularly since the advent of pension freedoms which re-ignited the debate on guarantees v flexibility. Many factors need to be considered such as other assets, income needs, health, family circumstances, retirement lifestyle and, perhaps most importantly, your attitude to risk and adaptability.

Guaranteed benefits are valuable and should not be forfeited lightly. For this reason, it is a requirement that advice is taken before deciding to adopt a more flexible approach; although no advice is required before taking guaranteed benefits.

Whichever your natural preference, this is one of the biggest decisions you have to make during your lifetime so take the time to talk with us first.

Neil Dainton Dip PFS 

This information is provided strictly for general consideration only. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case. The value of investments can fall as well as rise and you may not get back the full value of your investment.