Many advisers are put off recommending specialist phased retirement products to retirees because of the complex nature of the products, say some experts. Too complicated compared to the alternatives of a pension annuity or income drawdown.

The suggestion is that these contracts are not being put forward because many advisers simply don’t really understand them. They are extremely cash efficient because of the tax-free cash component, but they are the most complex and therefore probably the least used contracts.

With them, you can buy a pension annuity or income drawdown plan in stages rather than all at once. Therefore, the product would be increasingly well-suited to those who were considering a staggered entry into retirement.

Seek out advice on this, it could be that phasing your annuity purchase could be right for you.

No doubt you have been watching the recent roller-coaster of share prices with trepidation, especially if you have a pension fund still invested. The good news is that if you are younger than 50, stockmarkets should have recovered long before you retire. If you are older, hopefully you have been switching into less risky areas over time, like cash, possibly via so-called lifestyle pensions, which gradually shift investments out of equities into safer areas as retirement approaches.

The more difficult decisions face those whose pension fund portfolios were risky in the run-up to retirement, and who could be sitting on losses in value, possibly significant. You could work longer if this is the case or delay taking your pension annuity, perhaps by switching it into an income drawdown scheme, which allows investments to continue until the market hopefully bounces back again. 

If you are approaching retirement and are satisfied withe size of your pension fund it might make sense to buy a pension annuity soon, which guarantees a fixed pension income throughout your retirement. Pension annuity rates have risen marginally over the past year, but could well fall back as interest rates decline.

As always, follow the golden rule; take advice when planning your retirement and buying your annuity.

There are some stories going round that pensioner incomes are at risk due to fears over the safety of annuities. There are growing fears that annuities may not be as safe as many believed. The Financial Services Authority (FSA) is believed to be in urgent talks with insurance companies over fears that annuities may be hit by the economic downturn.

The current the credit crisis has thrown up major concerns over the security of the investments used to back them…corporate bonds. Although they are usually considered a safe, even dull, investment, they are only as good as the companies issuing them.

Nearly half of all the £237bn corporate bonds in the UK are issued by banks, which are no longer the safe institutions they used to be, as witnessed recently.

If some of these corporate bonds defaulted on a widespread scale, it will put a huge strain on insurance companies, which may have to dig into their cash reserves to honour their pension and annuity promises.

Industry insiders are suggesting that the FSA has given insurers six months to boost the amount of cash they hold or switch to safer gilts, which are issued by governments rather than companies.

Phil Naylor, of Legal & General, which looks after £18bn of annuity business, states that they look for top-rated bonds, but they also include the risk of a bond going into default in their pricing. 

Well, do you? Plenty of websites have links to enhanced annuity or ‘impaired life annuity’ assuming you, a member of the public, actually knows what they are looking for. On our new improved online annuity comparison website, to be launched shortly, we will be introducing you to these subjects in layman’s terms, through links to ’smokers’ and ‘ill health’, just to make it easier.

For clarity, enhanced annuities and impaired life annuities are terms given to annuity contracts offering higher annuity rates because of the likelihood of a shortened life expectancy due to a lifestyle condition, a medical condition, the taking of certain medications, and for regular smokers.

There has been a surge of income drawdown investors have requesting annuity quotations as a result of the volatile stockmarket conditions we are witnessing currently. In the last three weeks there have been  signs of a ‘major capitulation’, according to Living Time.

Since the middle of October a significant number of people with income drawdown contracts, who have seen big falls in the value of their pension funds, have been looking at annuities for the guarantees they offer. Security has become the driving factor.

The huge swings on the markets have really brought home the dangers to those in income drawdown contracts and even experienced investors are looking for ways out of their predicament.

It might not be the best solution for people to believe they can only get security of income by giving up all flexibility. A fixed-term annuity of the type offered by Living Time can provide guaranteed income and investment growth, plus a guaranteed capital sum at the end of the term. Furthermore, it offers flexibility to let the dust settle so savers can restructure their finances sometime in the future.