This article is part of Morningstar's Guide to Retirement Saving. All this week we are arming you with the tools you need to boost your pension pot and secure the best possible income in retirement.
Gone are the days when Britons viewed their property as their pension. Despite a fifth of people planning to downsize or sell their home to unlock cash, according to a study by Friends Life UK, when it comes to those living in retirement, only 4% actually utilise their property.
My retirement will be as long as my working career
Instead, they plan to rely on a mix of pensions, cash ISAs and savings to fund their old age.
Fifty-three year old investor Lynne Murtagh, has accumulated a basket of products to provide income in retirement; a number of company and private pension plans as well as an investment property, cash ISAs, fixed-rate bonds, shares and instant-access savings accounts.
“When it comes to money, I'm a firm believer in not putting all my eggs in one basket," she says. "So to solely rely on property as my pension just seems too risky in the long term.”
Murtagh, pictured below at her home in the West Midlands, says that the pension reforms have had a positive impact on her retirement plans.
“The changes have completely transformed the way I will handle my two private pensions,” she says.
In the past, savers have been able to make a one off withdrawal of 25% of their pension in a tax-free lump sum, and have had to buy an annuity with the remainder of their money.
But from this month, those aged 55 and over were granted considerable pension freedoms – including the option of taking a number of lump sums, which in each instance will be granted 25% tax-relief.
For Murtagh, this is “great news”.
“Previously, my private pensions would have only generated such as small return each month, just £25. But now I can withdraw lump sums whenever I wish so it will enable me to do more with the money.”
For Murtagh, this means that rather than the small amount of income she would have previously received which "would have been swallowed up by bills", she will be able to benefit from her pension savings.
“I Find the Idea of an Annuity Comforting”
The HR manager also said that she plans to purchase an annuity with her two workplace pension schemes.
“I find the idea of having a guaranteed income for life rather comforting as I have no idea how long I will live,” she explains.
“If my family history is anything to go by, I should see well into my eighties – which would mean my retirement would be length as my working career.”
Murtagh admits that, like most people, she is looking forward to retirement and can “see the light at the end of the tunnel”.
“I’ve working and saving since I was 17 years old,” she says.
“For the first time in my life, I will actually have more money than I need. I have cleared all my debt, so any money coming in will be mine to do with what I want. It’s quite liberating.”
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