Alice has been in a defined-contribution pension scheme since she was 35 and will retire in one year’s time at age 66. Her salary is currently £55,000. Throughout her enrolment in the scheme, she has paid 8% of her salary, and this has been topped up by employer contributions and tax relief worth 4% of her salary. She will also qualify for a state pension of £9,000 per year. Alice has been in a defined-contribution pension scheme since she was 35 and will retire in one year’s time at age 66. Her salary is currently £55,000. Throughout her enrolment in the scheme, she has paid 8% of her salary, and this has been topped up by employer contributions and tax relief worth 4% of her salary. She will also qualify for a state pension of £9,000 per year.

If Alice uses her whole pension fund to buy an index-linked annuity, how much income will she receive in her first year of retirement?

Answer rating: 100% (QA)

The drawdown may be a less attractive option for Alice because the mon... View the full answer