Pension options when approaching retirement

You’ve toiled hard for many decades and managed to accumulate a nice pension pot. You look forward to doing all those things you’ve been planning for years: Chilling out, holidays, spending more time with family and friends, revamping the house, and enjoying hobbies. But dilemmas present themselves and require decisions regarding your pension pot and your options at retirement:

  • How much of a tax free lump sum should I take and what am I entitled to?
  • Should I take a taxable cash option?
  • What if I intend to live abroad?
  • Should I put the remainder of my pot in an investment fund (ARF) or purchase a guaranteed income for life (Annuity)?
  • Will my pension be passed on to my estate if I die?
  • What are the tax implications of all my options?
  • Will my pension last?
  • How does my pension interact with the State Pension?

The most common route taken at retirement over the last 10 or so years is ‘25% of pension pot taken as a tax-free lump sum and transfer the rest into an ARF’. This approach still holds huge merit, particularly if the ARF fund is well managed by a good advisor.


But other options need closer consideration – particularly as ARF funds in general have taken a material hit since the invasion of Ukraine which has led to rising costs, rising interest rates and volatile stock markets. 


As bond prices have also taken a hit, bond yields have risen globally. This means that potential annuity income has also risen – forcing annuities firmly back in the spotlight as a viable option to consider for those approaching retirement.


For example, in 2020 every €100,000 of your pension pot provided roughly €3,600 income per annum for a standard single annuity for a male of 65. As we begin 2023, the income on offer has risen to roughly €5,000 per year for every €100,000.  That’s an increase of almost 40%.

So, between better available annuity rates, multiple annuity options to take account of health, spouse and inflation, and the prospect of guaranteed income without investment risk, annuities will be the go-to option for some, and should at least form part of the conversation for detractors. Alongside their advisors, others will explore the maths behind an ARF, annuity mix. 

Whatever options are considered, they should ideally be done so with the expertise of your financial advisor who is well positioned to provide advice and will take consideration of all aspects of your unique circumstances at retirement, including:

  • Your appetite and tolerance for risk
  • Other assets and income apart from your retirement fund
  • The size of your retirement fund
  • The level of income you and your dependants will require during retirement
  • Your current state of health. 
  • Whether you want to pass on your pension to your estate

If you are approaching retirement and require support, advice, number crunching and a holistic approach to your unique retirement circumstances, then please feel free to contact MOJO Finance and we’d be delighted to help.

Pension options when approaching retirement