Which source should fund which year?
Retirement income does not arrive neatly. Karen’s teacher pension begins with retirement. My State Pension arrives later, Karen’s later still. We wanted more spending in the active first decade and less later. Tax sits across the whole sequence.
The problem was never simply ‘how much have we saved?’ It was how to bridge the gaps without exhausting the flexible money or creating unnecessary taxable income.
Why I initially liked a large annuity
An annuity felt like salary: predictable money arriving every month. After decades of employment, that felt safer than watching savings reduce. Early versions therefore bought a larger annuity immediately.
But that committed more pension money at the start and created taxable income before the later guaranteed sources arrived. Some versions then consumed more ISA to hit the spending target without pushing taxable withdrawals higher.
The branch that changed the shape
We modelled staged pension access: use tax-free cash and planned taxable withdrawals in the early years, blend in ISA where useful, and buy a smaller annuity later when it has a clear job alongside the other guaranteed income.
We also tested lower spending. That produced very healthy later balances—but raised a different risk: deliberately living smaller lives in our sixties so the model could make us wealthier in our eighties and nineties.
The current shape
Retire in 2035. Use Karen’s pension and planned pension/ISA withdrawals to fund the early years. Target higher net spending through the active first decade, then reduce it later. Buy an annuity of roughly £12,000 a year with 50% survivor protection, timed to fit the wider income sequence rather than bought automatically on day one.
State Pensions later reduce the work required from the remaining pots. A substantial ISA buffer stays flexible rather than being treated as the first pot to empty.
What this solved—and what it did not
It produced a plan that matched how we want to live rather than maximising the amount left at old age. It did not remove investment risk, tax uncertainty, annuity-rate uncertainty or the possibility that our spending changes. The sequence made the plan understandable; it did not make the future obedient. Shame, really.
It reflects our ages, pensions, mortgage, tax position, priorities and assumptions. The useful bit is the questions we asked—not copying our answer.
Official information we checked
Rules change. These links are for checking the underlying rules rather than treating our experience as guidance.