Mid-retirement MOT

Retirement planning has changed from a one-off big event to a financial and personal journey throughout retirement involving a number of different decisions and options.

There are still some people who stop work and replace their earnings with a guaranteed pension income but more and more people now have a more flexible and fluid journey into retirement.

I was reminded of this when I read about suggestions for a mid-retirement MOT. In my opinion, this is needed because a lot of time and effort is spent planning for retirement and setting up the first leg of the retirement journey, but not enough time is spent reviewing retirement plans throughout the rest of the journey.

Advisers who take an ongoing fee for reviewing their client’s SIPP investments no doubt do a good job. The FCA recently reviewed the quality and delivery of ongoing financial advice services and the results showed that in 83% of the cases where suitability reviews were promised they were delivered.

But what about those clients without an adviser? Also, do advisers carry out a full MOT or just check the investments are on track and in line with the client’s risk profile?

One of the new buzz words in retirement planning is ‘flex first, fix later’. This suggests flexible drawdown in early retirement and guaranteed annuities later. This is not a new idea as more than 20 years ago I was writing about ‘Balanced Retirement’; a combination of drawdown and annuities that would change over time.

In my experience, the concept of de-risking as people get older is widely accepted but while it is understood in theory, it is much harder to deliver in practice.

I confess to finding this hard myself because it is easy to get trapped in the status quo and much harder to actually make changes or alter course.

So, what can be done to turn the theory in practice? This is something that has concentrated my own mind recently following the downturn in global financial markets caused by President Trump’s tariff policies.

I suggest three things: Help clients understand the importance of de-risking, be more active in re-balancing investment strategies and put annuities into the retirement equation.

The most persuasive reasons for de-risking I have found come from a long-lost article entitled “Annuitisation shouldn’t be a secret”, which listed some of the concerns and objectives of older retirees.

• There is more concern about income and risk of outliving their financial asset
• A strong desire to preserve their standard of living in the long-term
• The need of many older individuals for simplicity and structure in their financial affairs
• Coming to grips with their own mortality and expressing concern about the desire or ability of a surviving spouse to manage money in the event of their own death

All of these comments point towards using joint life annuities to secure income for life.

Again, fine in theory but how do we actually get people to swap some of their drawdown pot for an annuity? One way is to give client’s an example of the amount of annuity income they could get as part of the annual review process. Don’t forget to get health details to see if an enhanced annuity is an option.

Finally, don’t forget, the amount of annuity income is the product of both current annuity rates and the value of the pension pot. Someone who had planned to arrange an annuity in April 2025 and had not de-risked their pension pot (i.e. had stayed fully invested in equity and bond funds) would have seen the value of their pension pot fall significantly. Although annuity rates had nudged up a little, the amount of annuity income they could have arranged would have been much less compared to the beginning of the year.

The Holy Grail of ongoing retirement advice is to look for times when pension fund values have grown and annuity rates are high and then lock into the high income.