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with profits annuity
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The With
Profits Annuity combines the payment of an income for life with the potential for growth as well as some protection from inflation.
Due to recent changes in legislation Protected Rights funds can now also be used to purchase a
With Profits Annuity (some restrictions apply).
Advantages
The availability of an Anticipated Bonus Rate (ABR) gives you more flexibility over your
level of income than you would have with a Conventional Annuity or an Inflation Proof Annuity. (The lower the
ABR, the greater the potential for higher increases in the future).
It comes with a guarantee that your income will never fall below a certain minimum level
Over the longer term, the potential for growth could keep your income ahead of inflation (depending on fund performance, inflation and the ABR chosen)
You can choose to switch to a Conventional Annuity at anniversary dates (some restrictions apply to Protected Rights benefits).
Disadvantages
Although your income has the potential to increase it could also go down or even fall below the amount you started with. This does not apply to Protected Rights benefits which cannot fall below the starting level.
Past performance is not a guide to future performance. Increases to income are not guaranteed.
How it works in more detail
The With Profits Annuity invests your pension savings in a with profits fund of a life insurance company, then pays out an income based on the
bonuses declared each year. The income paid represents your share of the profits of the underlying fund. Bonus additions will depend, principally, on the investment performance of the
with profits fund, changes in how long planholders are expected to live and expenses
incurred. The rate of future bonuses cannot be guaranteed.
You can select your starting income using an Anticipated Bonus Rate (ABR) within a certain range. A larger ABR will provide a higher level of initial income, however it will also provide smaller annual increases and the risk that your income could go down will be higher.
For the protected rights fund a 0% ABR must initially be selected. To obtain a desired income it may be possible to achieve this by selecting a higher ABR with money from non-protected rights.
While offering the opportunity for growth the income from a With Profits Annuity isn't guaranteed -
it can go up or down. The protected rights benefits cannot fall below the starting level.
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