Shedding daylight on the pensions conundrum
With the evenings closing in fast and a freshness returning to the air, all that remains of summer is some great memories and some dusty old parks and gardens. Just how long will it take for our grass to regain its greenness? Conventional wisdom is 3-5 weeks given decent levels of rain and so by October our dusty lawns may well look like grass again and by the time the clocks go back on the 25 October and the Autumn budget hits our pockets 3 days later, the long hot summer will be a distant memory. That may well be a good moment to plan a winter break, somewhere sunny!
On the subject of clocks going back, the idea of changing the clocks actually predates the First World War. In Britain, a builder called William Willett became one of its strongest campaigners after noticing how much early-morning summer daylight was effectively being wasted while people were still asleep. His proposal was discussed in Parliament before the war but was not adopted.
Then, during World War I, Germany introduced daylight saving in April 1916, primarily to reduce the use of artificial lighting and therefore conserve fuel. Britain followed shortly afterwards, introducing British Summer Time on 21 May 1916. On the last Sunday in October clocks go back again, reverting to Greenwich Mean time.
While it is perhaps too early to make alarmist budget predictions, a number of you may be struggling (or have clients who are struggling) to decide what to do with their pension pots now that Inheritance tax (IHT) will apply from 6 April 2027. It is undoubtedly a complex decision. Annuities may provide a solution and please see the table below which provides a sample of current rates. Drawing an income from your managed pension, known as flexible access drawdown, may also be the way to go. In both cases the excess income net of tax, may be gifted using the favourable IHT exemption, gifts out of surplus income. (It is important to take tax advice on this point.) However, it may simply be best to do nothing and leave your pension fund IHT free to your surviving spouse, especially if he or she is quite a lot younger than you.
Every situation is different and so please do speak to us about a wealth planning report tailored to your circumstances; don’t just opt for a product.
£1 million at retirement – what income could it provide?
Rates and figures shown are as at 31 August 2026.
| Retirement option | Initial gross income p.a. | Access to capital |
|---|---|---|
| 1-year fixed cash | £48,500 | Yes |
| 10-year UK gilt | £51,400 | Yes, although market value fluctuates |
| Level lifetime annuity* | £77,000 | No |
| RPI-linked lifetime annuity* | £52,000 | No |
| Flexi-access drawdown | See below | Yes |
* Annuity figures shown are for a healthy individual aged 65 and are based on a single-life annuity.
Annuities
| Age | Level – Single | Level – 50% Spouse | RPI – Single | RPI – 50% Spouse |
|---|---|---|---|---|
| 60 | £71,400 | £69,000 | £45,700 | £43,200 |
| 65 | £77,000 | £74,000 | £52,000 | £48,000 |
| 70 | £84,300 | £80,800 | £59,600 | £55,600 |
| 75 | £94,400 | £89,300 | £72,000 | £65,450 |
Rates and figures shown are as at 31 August 2026.
Flexi-access drawdown — income and remaining capital
| Net investment return | Starting income at 65 | Fund at 75 | Fund at 85 | Fund at 95 | Fund at 100 |
|---|---|---|---|---|---|
| 3% | £31,928 | £936,312 | £736,556 | £321,962 | £0 |
| 4% | £37,632 | £978,079 | £804,981 | £368,712 | £0 |
| 5% | £43,878 | £1,016,690 | £872,408 | £417,893 | £0 |
| 6% | £50,634 | £1,051,932 | £937,976 | £468,974 | £0 |
Rates and figures shown are as at 31 August 2026. Income is before tax.
Important information and risk warning
The figures are illustrative and do not constitute a recommendation. Drawdown projections assume a constant annual investment return net of charges, which will not occur in practice. Actual returns will fluctuate and poor investment performance, particularly in the early years of retirement, can materially reduce the sustainability of withdrawals. Annuity rates depend on individual circumstances and the options selected.
Birchin Lane Wealth Advisory Limited is an authorised representative of Prosper Financial Solutions Limited which is authorised and regulated by the Financial Conduct Authority. Tax and general wealth planning advice is not regulated by the Financial Conduct Authority.
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