If you were no longer around

When the retirement age was first set at 65, nobody expected us to live as long as we are. For many who have not been able to save enough during their working lives, it will mean working harder and maybe longer. For some people, the flexibility of phased retirement may help the transition.

Phased retirement can be seen as a series of mini-retirements. Basically, your pension is split into lots of smaller identical pensions and rather than retiring all of them on the same day, you take just a few at a time over a period of years. Therefore, at initial retirement, you could take a mini tax free lump sum, plus a mini-annuity, using up just part of your overall fund. You leave the rest invested and then take more at fixed dates in future or as your needs change. Finally, you convert any remaining part of your retirement fund to an annuity at age 75.

The advantages of phasing can include the potential for further growth on the money left invested. Also, annuity rates generally improve as you get older, so later retirements should buy more income than earlier ones. However, there are also risks to consider. The money remaining invested may fall in value if markets turn down - or annuity rates may fall if actuaries decide we are living even longer. In addition, you may not be able to access your entire tax free lump sum until your entire pension is taken. Finally, there are charges involved which can eat into your fund. However, you only retire once so you need to make sure you consider every option.

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