This article is about pension annuities and alternatives to getting the best pension annuity rates in 2010; some alternative retirement options. Although a basic annuity will be suitable for most people, there are alternatives available for those with larger pension funds and a willingness to take higher risks. The main two options are an investment linked annuity and income drawdown (now unsecured pension). With normal annuities, your purchase money will be invested in gilts. These pay out a fixed level of interest and, because the UK government issues them, they are regarded as a particularly low risk investment.
Investment-linked annuities covers both with profits annuities and unit linked annuities, and, if security is important to you and you’re depending on your annuity as your sole source of income, you may find these products too big a risk to take. Compared to a conventional pension annuity, in theory you could potentially get better returns with an unsecured pension. But they’re called unsecured for a reason, and your investment could be susceptible to drops in the stockmarket. This option is really for sophisticated investors who are comfortable taking risks and who could possibly afford to lose some money. With an unsecured pension arrangement, your income is not set for life. It remains partly invested and exposed to the stockmarket.
There are three different types of unsecured pension. There are short-term annuities, income withdrawal, and phased retirement, and there are three key reasons people choose these over conventional annuities. There are those who only need a small amount of the income that would be accessible from a pension annuity and they may wish to leave most of the fund invested while drawing their limited income. And, when annuity rates are low you might decide to delay buying one in the hope that rates will increase. There are no guarantees that this will happen, though. Or, if you want to leave the fund to your partner should you die, an unsecured pension means your money is more accessible.
