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Alternatives

MyLovelyRetirement.co.uk offers a pension advice service designed to help you make the best use of your Open Market Option to find a better income in retirement.

 

This page gives a brief description of the main alternatives to a lifetime annuity as well as a little bit about who they may suit and why.

 

If, after discussing your circumstances, you decide an annuity isn't right for you (right now) we'll talk you through the alternatives and recommend the one that suits you best.

What is it?

 

A lifetime annuity where your pension income is dependant on changes in the value of investments such as stocks and shares. This means you can benefit from stock-market growth after your retirement but equally that your income could drop in retirement.

A with-profits annuity means your income is linked to the performance of the annuity provider’s with-profits fund whilst a unit-linked annuity means your income is linked to the funds you've chosen; if you opt for a unit-linked annuity, you will usually have to choose from a range of different funds containing different investment assets.

As these are relatively complex products they have higher charges than "basic" lifetime annuities which could reduce your income as a result.

 

Who might it suit?

 

Someone who is prepared to risk a reduction on their annuity income in return for possible growth.

Someone who has a number of pension "pots" and who is prepared to take a risk with one of them as they have others invested in a more secure way.

Someone who doesn't need a guaranteed amount of income each year but can cope with fluctuating income levels.

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Investment Linked Annuity

Fixed Term Annuity

Income Drawdown

What is it?

 

This is a product that gives a guaranteed income (including nil) over a set period of time and a guaranteed maturity value at the end of that time.

Normally there is a clause built in that allows you to "break" the term and transfer your pension fund (or the value of it at that time) to a lifetime annuity or other pension income product.

You should be aware that annuity rates may not rise during the time your money is in this product but, equally, you will be older (and therefore qualify for a higher rate) when the term ends.

 

Who might it suit?

 

Someone who doesn't want to commit to a lifetime annuity right now as their circumstances might change.

Someone who is in the early stages of an illness that will worsen; when it does the annuity available should increase.

Someone whose income requirements or financial position may change in the future.

What is it?

 

This is a product that allows you to keep your fund invested whilst taking some income out each year.

You should be aware that the value of your fund can fall and so if you are taking a relatively high income from the plan you might exhaust it before you die.

As the fund is invested and needs management there may be higher charges and so this product might not be suitable for smaller pension funds.

 

Who might it suit?

 

Someone who wants to vary their income levels from year to year (perhaps for tax reasons).

Someone who is comfortable taking investment risk in order to hopefully increase the value of their pension fund and so their pension income.

Someone who wants flexibility around how much tax free cash and/or income they want to take and how they want their pension fund invested.

Weighing scale fitted on a stand

 

MyLovelyRetirement.co.uk (MLR) is a trading style of Farsight Financial which is authorised and regulated by the Financial Conduct Authority.