Not all partners want to retire simultaneously. There may be age differences or career trajectories at play. Considering the partner is particularly important if a person is looking to buy an annuity – clients are often surprised at how little extra it costs to add a spouse benefit of maybe 50 per cent pension continuing after their death.
Any dependants to support?
Do they have other dependants that they want to support through their retirement? Demographic shifts as they are, it is more likely than ever that retirees will be supporting children and grandchildren with education and/or housing costs out of their retirement income.
Logically, this trend must have an impact on retirement income needs. However, does it also mean a bigger focus on what the next generations will inherit from the retiree? If they want them to be assured of benefiting from any remaining pension savings, they will need to make sure they keep as much as possible in their DC pension.
The individual may also want to avoid the traditional glide path away from riskier assets if they are trying to optimise what the next generations inherit after they die, because planning to leave an inheritance at the end of retired life is a long-term investment horizon.
Do they need to increase their retirement income each year? We have written before about the need to bear in mind different income streams as part of income drawdown planning. For example, it is worth building in dates for receipt of the retiree and their partner’s state pension entitlement if they have retired before the individual's respective state pension age. They can then schedule a reduction in income drawdown amounts as the state pension payments start coming in.
Keeping up with inflation
By the same token, is the retiree determined that their retirement income needs to rise to keep pace with inflation? If so, over the past couple of years of retirement they will have needed to increase their retirement income by close to 10 per cent each year. However, they might prefer to leave it to their own and their partner’s triple locked state pension payouts to counteract inflation rises.
If that is the case, then there are other decumulation options including level-term annuities and, in the future, decumulation collective defined contribution pension schemes, which will target but not guarantee increases in line with inflation and should assure higher investment growth.
