Unit Linked Annuities
Retirees are increasingly favouring investment annuities in the face of dwindling conventional annuity rates. Unit linked annuities are invested in underlying funds. You select an initial income level at outset, called an Anticipated Growth Rate and future income may be more or less than this- depending on the performance of the funds. The income you derive from a unit linked annuity can fluctuate, and will depend on the performance of the underlying invested assets. Hence it is a higher risk option, but one which has greater potential upside for growth than a conventional or a with profits annuity. For unit-linked annuities, the higher anticipated growth rate of the fund, the greater the level of risk since the underlying assets may not produce the expected returns.
Whilst there is the potential to boost your retirement income by taking out a unit linked annuity, you are faced with the potential risk that pension income could be less what you could have had from a conventional annuity. Further, once you set up an investment annuity, you cannot change the contract later which you can do with other retirement options, such as Income Drawdown.
Flexible annuities offer a hydrid between conventional annuities and pension fund withdrawal and are designed to avoid some of the risks associated with drawdown whilst giving flexibility and potential for capital growth which conventional annuities lack. Flexible annuities have tried to combine the best elements of both conventional annuities and drawdown by offering guarantees. These guarantees vary significantly amongst annuity providers. Some guarantees will "lock in" gains made from the invested assets, whilst others will guarantee an interest rate applied to the fund which gives an income guarantee. Sometimes flexible annuities will offer a combination of the two. Income guarantees can avoid the pitfalls characteristic of those faced by retirees of the difficulty involved in market timing. Further, they can offer a "safety net" to those looking to limit the downside of drawdown whilst retaining flexibility and control over their retirement incomes.
Many retirees prefer to delay purchasing a conventional annuity until they are more aware of what their future needs may be- particularly with regard to funding long term care. Improved death benefits from flexible annuities compared to conventional annuities can allow you to pass on a legacy to your dependants or beneficiaries- again the products vary significantly with regard to death benefits. Another major difference in the product design of flexible annuities is what happens at age 75. Some products require no action at all, others require an additional annuity purchase at age 75.
The choice of flexible annuity plans is considerable, with different products catering for different annuity requirements. Below you will access to more information about these types of flexible annuity.
For all of the flexible annuity plans mentioned above, the Annuity Discount Brokerage will offer to rebate commission in a similar way to conventional annuities- this is calculated on a sliding scale which you will find on our home page. Please remember that we cannot give you advice on these products since we are an execution only discount broker.