David crystallises his pension and uses his 25 per cent tax free cash to pay off his mortgage and with the balance, purchases a fixed income of £6,300 for five years to help meet his outgoings.
Some providers have launched retirement accounts (generally under a Sipp wrapper) that can hold lifetime and fixed-term annuities (their own products) plus a flexi-access drawdown within the same wrapper. Importantly, these retirement plans also have a cash account. This addition allows income (which must be paid from the lifetime annuity) to be paid into it. This can be extremely tax-efficient in the event the member no longer requires income from this source.
Blending products may only appeal to a select number of clients and probably few who have larger funds. However, even for these clients who want security and flexibility, blending could be appropriate.
Nigel Orange is technical manager of Canada Life
Key points
Pre-pension freedoms, many clients may have felt annuities were like a straitjacket solution.
There is no magic bullet to achieving both total security and total flexibility for the client.
Fixed-term annuities which are written under drawdown, rather than annuity rules, can be a useful part of a retirement portfolio.
