Annuities
When you take out an annuity, you exchange your pensions savings for a guaranteed income for the rest of your life. The annuity company takes the risk of how long you will live.
However there are a variety of options that you can choose to specify the exact annuity you want
Single or joint life. If joint how much for your surviving partner 50, 66 or 10% ?
Level or index linked. If index linked by how much ? How long will it take for the lower index linked version to overtake and then break even with the higher starting level income ?
A 5 or 10 year guarantee or capital protection to insure that your estate is compensated against the risk of your death in the early years of retirement.
Income payment monthly, quarterly, half yearly or annually – in arrears or in advance.
In addition to the conventional annuity there are a few companies offering investment linked annuities. These invest the funds into the selected funds either the with profits fund, or your choice from the range of unit linked funds on offer.
In this case, unlike the conventional annuity above, your income can rise or fall depending on investment performance. In some cases there may be a mimimum income underpin.
Subject to the guarantees or capital protection, or spouse's pension above (if selected) there is no value on your death.
If you apply for enhanced terms these are available for all except unit linked annuities.