Although a basic annuity, in one form or other, will be suitable for some people, there are alternative options available for those with larger funds and a willingness to take higher risks. The main two options include Investment-Linked Annuities and an Unsecured Pension.
With normal annuities, your money will be invested in Gilts. These investments pay out a fixed level of interest and, because the government issues them, they are regarded as a very low risk investment.
Investment-linked annuities, also known as ‘With-Profits’ annuities, could pay you more if your investment fund performs well and exceeds the annual bonus rate on the policy. By investing in higher risk products, such as the stock market funds, your income may not be consistent. Your annuity could pay less if the fund under performs.
If security is important to you and you’re depending on your pension as your sole source of income, you may find this just too big a risk to take.
Compared to conventional annuities, in theory you could potentially generate better returns with an unsecured pension. But they’re unsecured for a reason – your investment could be susceptible to drops in the market. This option is for sophisticated investors who are comfortable taking risks and who could afford to lose some money.
With an unsecured pension, your income is not set for life. It remains, at least partly, invested and exposed to the stock market. There are three main types of unsecured pension:
There are three key reasons people choose unsecured pensions above conventional annuities:
So much will influence what’s right for your individual retirement needs. It is vital with products this complex to speak to a specialist adviser. If unsecured pensions are something you are considering, we can help. Call us today to set up an appointment with our specialist retirement adviser.