LV= suggests some reasons you may want financial flexibility in retirement

6th August 2013

This isn’t a very cheery release from insurer LV=. Its research shows that within the first five years of retirement, 31% will suffer from worsening health and 10% may be diagnosed with a serious illness. The insurer says this can represent a significant potential change in financial circumstances and may help make the case for more flexible retirement planning i.e. a reason not to simply take a lifetime annuity.

It is not all bad news of course. Other reasons, among others, can be the birth of a grandchild or receipt of an inheritance. It is interesting that 3% of those surveyed are returning to work. The insurer has compiled a list below.

The changes that happened to retirees within the first five years of retirement

A grandchild was born 38%
Worsening health 31%
Needing to help family members financially 26%
Carrying out significant work to property/garden 24%
Moved house 19%
Received an inheritance 10%
Diagnosed with a serious illness 10%
Widowed/bereaved (partner)  4%
Returned to work  3%
Relocated to another country  2%

The insurer makes the case for considering not necessarily taking out a lifetime annuity.

LV= Head of Annuities Vanessa Owen says: “People often associate retirement with relaxing and taking things easy, however, it is also a time when some major step changes can happen in life. It is important that people build in some flexibility to their finances, so they have the option to adapt to their changing needs as they settle into retirement. The majority of people still currently fix themselves into an annuity for life at the point of retirement, which may limit their options in the face of life changes.”

Vanessa Owen continued: “There are thousands of people coming up to retirement every week, entering the unknown and trying to transition from working to retired life, and many of these people will find themselves in a very different set of circumstances five years down the line. At that point it could be too late to change the way they can access their retirement funds.

“It is essential that people do their homework and don’t just plump for the annuity offered to them by the company they have saved a pension with. We would always recommend that people seek specialist independent financial advice, to consider all the options available, from a lifetime annuity, enhanced annuity, fixed-term annuity, investment-linked annuity or income drawdown. There are lots of different ways to structure retirement income but many won’t be aware of these options unless they seek advice.”


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