Alternatives to annuities

What are the alternatives to annuities at retirement? Well there are a number of options that you could consider. Firstly there are guaranteed annuities to consider or invested annuities. Then there is unsecured pension which is also more familiarly know as income drawdown.

Annuity Options

If you take a guaranteed annuity then you basically get what it says on the tin, a guaranteed annuity, which means that the income that you get is guaranteed for the rest of your life. If you choose an escalating income then it is still guaranteed for the rest of your life. With both of these what it means is the income cannot fall. With an invested annuity the income is not guaranteed, it can go up or down depending on how the underlying investments perform. Hence normally these type of products are bought by annuitants that have additional income income from other sources.

Unsecured Pension (Income Drawdown)

Many people that reach retirement do not want an income initially and therefore they go into income drawdown. With income drawdown you can take your tax free cash and leave the remainder of the fund invested. Again the reason it is called unsecured is that the underlying investments can rise and fall, which means that income can fall.

The options at retirement should be discussed with a qualified independent financial adviser and preferably a specialist in retirement options.

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