Having spent a lifetime building your wealth, the challenge now shifts to turning it into reliable income. Ideally without running out of money or peace of mind. This is where logic meets emotion, and where the right mix of flexibility and security makes all the difference.
Striking the right balance between the security of guaranteed income and the flexibility of keeping assets invested is one of the biggest retirement decisions. The decumulation phase can last 20–30 years, and inflation will quietly erode the value of most fixed-income assets. Unlike during your working life, you cannot simply “work a bit longer” if markets dip. Making the most of what you have becomes paramount.
Your state pension, any defined benefit schemes, and other regular income sources form the secure foundation. Cashflow modelling can show how far these cover your essential spending. If there is a shortfall, you may consider options such as annuities, where rates have improved notably in recent years, or a blended approach combining guaranteed income and invested assets for growth and flexibility.
During your career, you may have been comfortable with a certain level of investment risk. But that doesn’t automatically carry into retirement. When you are drawing income from your portfolio, volatility feels very different. It is worth retesting your risk attitude and aligning it with your spending needs and timeframes.
For example, if you retire at 62 but will not receive the state pension until 67, you will need access to lower-risk funds for those first few years, while other assets earmarked for later can stay invested for longer-term growth.
The switch from earning income to drawing income also changes the tax picture. With a bit of planning, it is possible to create surprisingly tax-efficient income streams. For instance, by blending pension withdrawals with tax-free cash (UFPLS), utilising personal allowances and ISAs, and sharing assets between partners. The numbers soon add up; two people can often generate a healthy income with minimal or even no tax if structured well. The key is to plan thoughtfully. The “tax tail” shouldn’t wag the investment dog, but it is an important part of the equation.
Even the best-laid plans need revisiting. Legislation changes, markets move, and life evolves. Reviewing your plan each year ensures your strategy remains aligned to your goals and that you continue to get the best from your assets.
The decumulation phase is as much an art as a science. There is no single right answer, but with a balanced approach, thoughtful preparation, regular review, and clear understanding of your options, you can turn a lifetime of saving into a lifetime of security and enjoyment.
Decumulation can be one of the most rewarding yet complex stages of your financial journey. The right strategy can help you enjoy your retirement with confidence, balancing flexibility, security and tax efficiency along the way.
At The Penny Group, we can help you to:
- Assess your readiness for the decumulation phase
- Model your retirement income to ensure long-term sustainability
- Optimise your pension and investment withdrawals for tax efficiency
With recent and upcoming changes to pension and inheritance tax rules, now is the ideal time to review your retirement income strategy and ensure it remains fit for the future.
Remember, all decisions should be considered in the context of your own personal circumstances.
If you wish to discuss your financial position and the options available to you, please contact one of our advisers.
You can reach us at info@thepennygroup.co.uk or on 0207 061 2345.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.
The Penny Group Ltd is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.
Approved by The Openwork Partnership on 13/10/2025
Managing Director at The Penny Group.
