Standard Life has launched its new mixed income builder tool, allowing scheme members to explore combined annuity and drawdown options.
This ‘protect and flex’ tool helps savers understand different retirement income options as they plan for retirement, and utilises the PLSA’s minimum Retirement Living Standard to demonstrate essential spending needs.
Using the state pension and other guaranteed benefits, such as DB pensions, this income builder tool shows that cost of guaranteeing this income via an annuity, and what might remain in the pension pot for or flexible or discretionary spending throughout retirement.
This new tool comes as a survey in the latest edition of Standard Life’s Retirement Voice shows that that vast majority of savers want both security and flexibility when it comes to retirement savings — 90 per cent of people want a guaranteed income in retirement, and 80 per cent valuing freedom to access their pot when they wish.
This tool, which is available via Standard Life website, offers savers insight to understand if they are able to reach the minimum income needed each year to cover essential costs. It also shows savers how they can adjust and increase their income beyond the minimum level, plus how much pension they might have left to take flexibly once essential costs are covered by a combination of state pension and annuity.
Standard Life director of workplace and retail intermediary Gail Izat says: “The increased flexibility brought about by pension freedoms has also increased complexity for pensions savers, many of whom struggle to decide how best to secure an income when they retire.
“For most it’s been all or nothing – either buy an annuity to provide certainty or choose flexibility. Flexibility offers people the freedom to access their money when they want or need it, but pots can fluctuate in value and with choice comes the responsibility of deciding how to best manage that money through a retirement that could last many decades.
“But the choice doesn’t have to be binary. A combined approach involving both annuities and drawdown can offer those in retirement a combination of income certainty and flexibility. In reframing how we talk to savers about retirement options we are encouraging people to think about their spending needs in retirement in combination with the level of guaranteed income they’ll need. We know that if people understand what their income options could look like in retirement, it builds confidence to plan for a more financially secure future.”
