Retirement does not have to be a stark choice between buying an annuity or retaining your investments and taking an income from them.

More people than ever are blending the two options to provide a basic level of guaranteed income while actively managing the rest of their portfolios. Some also like having the flexibility to delay annuity purchase in the hope that the rates improve.

The key to deciding how to use your retirement savings to best effect is sitting down and ranking how much you value things such as flexibility of income, steady monthly payments, or knowing that you can pass on your savings to the next generation in the best possible way

Billy Burrows, director at the consultancy firm Retirement Intelligence, suggested people think about retirement in three stages.

“In your early sixties you are active and may have part-time or consultancy work; there’s a middle period when you take it easy, and in later life you might need to pay for care,” he said.

Mr Burrows suggested buying a series of annuities, using money in drawdown accounts, as the need for flexible income wanes in later life. Purchasing annuities gradually minimises the risk of buying when rates are low. Buying annuities later will boost rates, as insurers expect to pay for fewer years

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