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Flexible Annuities
The various annuities available in the UK are increasing each year and insurance companies continue to develop new types as consumer needs change. Some of the more recent market developments have led to more flexible annuities, which can be more complex to understand when compared to traditional annuity types. They are designed to avoid some of the risks associated with Unsecured Pension, or income drawdown, whilst offering increased levels of flexibility and the opportunity for some growth in the income received. The options available are considerable and new developments are being made. Examples of the types currently available include:
Temporary Annuity
This is typically an option for those with larger pension funds. After taking your tax free lump sum, a portion of the remaining fund is used to buy a temporary pension annuity for any period lasting from 3 years upwards, whilst the rest of the pension fund remains invested. Your options are reviewed at the end of the selected period. When you purchase a temporary annuity you can select the various options that you want to include, such as escalation or a spouse or partner’s pension.
There are risks involved with temporary and you must convert to an Alternatively Secured Pension (ASP) or buy a traditional lifetime annuity by the time you are 75, under current rules.
Flexible Annuity
This option is typically available for larger pension funds and allows you to take varying amounts of income, between allowable limits. One feature of a flexible annuity is that you can retain some investment control by selecting the underlying investments into which your pension fund is placed.
Flexible Lifetime Annuity
Pays an income for life, but is designed to give you greater investment control of your pension fund, offering a more flexible way of receiving your retirement income and, if you choose, providing benefits for your dependants. The value of your fund may go down as well as up.
It is typically intended for people with a larger pension fund at retirement, who may be willing to take greater risk with the amount of income that they receive in retirement.
We recommend that you take specialist advice before purchasing a flexible annuity, and that you fully understand the risks involved.
