Putting all your eggs in one basket is never a good idea. The same goes for income. Relying on one type in retirement might feel like a simple idea, but it can leave you exposed.
Markets fluctuate, tax rules change, and your spending needs will likely shift over time. That’s why more people are building a ‘blended retirement’: combining pensions, ISAs, annuities, and cash savings to create a mix that can flex with life’s ups and downs.
Your 60s – Balancing Flexibility and Growth
For most of us, this is often the transition decade, you’re winding down from full-time work, drawing on your well-earned investments for the first time, or you are starting to think a little more seriously about when to start.
A blended strategy in your 60s might look like this:
- Flexible pension drawdown. You may start dipping your toes into your pension, but not necessarily drawing a full income. Keeping some invested does give your pot a chance to grow more.
- ISA withdrawals. If you’ve built up a Stocks & Shares ISA, this can be a nice top-up. Want to know the big benefit? Withdrawals don’t count as income, so they won’t affect your tax band.
- Cash buffer. It’s worth having one to two years’ worth of spending set aside in a savings account. This gives you breathing space if markets fall, so you’re not forced to sell investments at a bad time.
If you’re still working part-time, this decade is also a good time to top up ISAs or pensions while you still have some earned income.
Your Early 70s – Watch Your Tax Bands
Once you hit your early 70s, a few things typically change, and they can all affect your income plan.
- State pension kicks in. For most people retiring now, this begins at age 66. It will gradually rise to 67 between 2026 and 2028. It’s guaranteed and inflation-linked, but it does eat into your tax-free allowance.
- You might be drawing more. If you delayed pension withdrawals, this is often when people start taking a regular income. With investment-linked drawdown, your income isn’t fixed, so it’s a smart idea to review it yearly. With the Lifetime Allowance now scrapped, it’s also worth reviewing your use of the new Lump Sum Allowance (LSA), currently capped at £268,275 for tax-free withdrawals.
- Pay attention to allowances. Withdrawals from pensions are taxed as income. But ISAs still aren’t. If you have both, it’s worth thinking carefully about the order you draw from.
- Don’t forget the MPAA. If you’ve accessed pension income flexibly (beyond the 25% tax-free lump sum), your annual allowance may drop to £10,000 a year.. Going over that allowance might trigger an annual allowance charge, so it’s very important to track any new contributions closely
At this point, it is a great idea to think about legacy planning too, especially if you want to leave part of your pension behind.
Later Life
You’ve spent your whole life working towards this moment, and all your hard work should pay off. You deserve a break. Especially when things like health, care costs, and ease of management become paramount. Making sure your money is protected for this time is important so that you can enjoy peace of mind.
- Annuities may come back into play. Interest rates have improved, and for those who want guaranteed income for life, annuities can be a helpful piece of the puzzle. At current rates, a 65-year-old taking a joint-life annuity could receive around 6.9% income, depending on the provider and options chosen. Some people use a small annuity to cover essentials and leave investments untouched for later.
- Keep a healthy cash reserve. Planning for potential care costs or big one-offs (like helping family or moving home) is easier if you have funds outside the market.
- Review your beneficiaries. Pensions can often be passed on tax-free, while ISAs form part of your estate. Check your nominations and consider who you want to benefit – and how you want them to benefit.
This is also the stage when many people simplify. Selling rental property, consolidating old pensions, or setting up regular adviser reviews can reduce admin and give peace of mind.
What Works When – A Quick Snapshot
Here’s how a few common income sources tend to fit across the retirement journey:
| Income Source | Early 60s | Early 70s | Later Life |
| Pension drawdown | Optional top-up | Often main income | May taper off |
| ISAs | Flexible withdrawals | Tax-free top-ups | Estate planning tool |
| State Pension | Not yet received | Starts (typically age 66–68) | Core income base |
| Annuities | Less common | Considered for certainty | Helpful for longevity |
| Cash savings | Short-term needs | Emergency fund | Peace-of-mind buffer |
Is it Time to Review the Mix?
Retirement is completely personal to every individual and that means your plan should be a unique blend of your choosing, whether it be a mix of pensions, ISAs, cash, and guaranteed income. The risk is spread, you have flexibility and it will help you manage your tax much more easily.
If you’re thinking about how to structure your retirement income or wondering whether your current setup still fits, a review could make things clearer.
Call 020 8366 4400 or email enquiries@cedarhfs.co.uk to book a consultation with our team.