With Profits & Unitised Annuities
Traditional annuities provide a guaranteed income; however, there are other types now available, namely With Profits & Unitised Annuities. They differ from traditional types in as much as the guaranteed element is either reduced or taken away altogether in exchange for the possibility of increased income in the long term.
In respect to a with-profits annuity, a low guaranteed income level is initially secured and then an annual bonus is payable from the (linked) with-profits fund. The level of income therefore fluctuates from year to year and is dependent upon the success or otherwise of the With Profits fund.
Under a unit linked annuity, no guarantees are provided. The income received is dependent upon the underlying performance of the linked fund/s, which will undoubtedly fluctuate over time. With favourable market conditions, a unit linked annuity may, in the long term, produce income that exceeds that of a traditional level or escalating annuity. The problem is that the reverse is also true; adverse conditions may seriously affect the value of a pension income.
With profits & unitised Annuities
Traditional annuities provide a guaranteed income in one form or another; however there are other types now available, namely with profits & unitised annuities. They differ from traditional types in as much as the guaranteed element is either reduced or taken away altogether in exchange for the possibility of increased income in the long term.
With a with-profits annuity, you initially secure a low guaranteed income and then receive annual bonuses from the with-profits fund. These fluctuate from year to year. You can lift the initial income by anticipating the future return of bonuses, rather like betting on them. However if the actual declared bonus rate is then lower, your income will drop and vice versa.
Under a unit linked annuity, no guarantees are provided. The income you receive is dependent upon the underlying performance of the fund. It can (and does) fluctuate considerably. With favourable market conditions, a unit linked annuity may, in the long term, produce income that exceeds that of a traditional level or escalating annuity. The problem is that the reverse is also true; adverse conditions could decimate the value of your pension.
Your best bet is to come in and discuss your needs with us. Call Independent Financial Planning Services on 01493 369221.