The reason people still buy annuities despite rates being so low is that they offer the only means of turning a lump sum into an income that’s guaranteed for as long as you live. Your annuity may still be paying you in 40 years time but how inflation will have eroded its value is impossible to tell.
An income drawdown plan solves some of these problems but brings new ones, these schemes, mean your pension fund remains invested and you can withdraw money from it to provide an income. Within limits your income can vary as your needs do. Of course if you keep your fund invested in assets such as shares, they have a reasonable chance of keeping pace with inflation. The problem is that if you use drawdown as a means of getting a better income than an annuity, you risk eating away at the fund itself.
Investment-linked annuities might provide a solution for some here your income will rise if the underlying investments do well (and fall if they don’t), but you get two important guarantees that drawdown doesn’t offer: your income will never fall below a set minimum, no matter how badly the investments perform; and the income will be paid until you die. Enable’s IFA’s are happy to talk through annuity options.
Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE
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