Annuity or Drawdown

 

To understand the main differences between choosing an annuity or drawdown have a look at the information below.

How Much Income Will I Receive?
Income Drawdown - You can choose the level of income withdrawal up to a limit with capped income drawdown and as much as you like if you can qualify for a flexible income drawdown product. Annuity - When you take out an annuity your income is fixed for life and cannot be changed. Annuity rates will vary from provider to provider so it is essential that you shop around to get the best rate.
Can I Choose Where My Fund Is Invested?
Income Drawdown - You choose where your fund is invested and it is important that you investment choices are reviewed regularly. Annuity - Once you buy an annuity you exchange your fund for a guaranteed income. So you do not need to worry about any investment decisions.
How Much Security Do I Have?
Income Drawdown - As your fund continues to be invested your income will be influenced by investment performance. This could mean your income could reduce over time due to market fluctuations. Annuity - Your income is guaranteed to pay out for the rest of you life and in some cases will also pay a spouses pension. If you chose a level annuity its value could be eroded by the effect of inflation.
Will I Have An Income For Life?
Income Drawdown - f you live longer than expected, experience poor investment returns or withdraw high levels of income you income could reduce and you may out live your income. Annuity - Your income is guaranteed for at least the rest of your life.
Are Income Payments Flexible?
Income Drawdown - You are able to increase or decrease income levels in line with set limits. Annuity - The income level is set at annuity purchase. You can choose to increase you income in line with an index to counter the effects of inflation.
What Happens On Death?
Income Drawdown - When you die your dependent may inherit your funds by buying an annuity, taking out an income drawdown plan or receiving a taxed lump sum. Annuity - When you take out an annuity you can choose to have you income paid for a guaranteed period irrespective of when you die. You could also request payments to continue to your spouse on your death.
Can I Qualify For Enhanced Rates
Income Drawdown - Health and lifestyle factors are not taken into consideration under income drawdown. Annuity - Yes you may be eligible to receive and enhanced annuity rate if you have health problems or are a smoker.
When you come to retirement there are a number of decisions that need to be made, and an independent financial adviser can help. They will explore all the benefits of taking our an annuity or drawdown to make sure you maximise your retirement income. Contact us today for more information.