Could You Benefit From An Investment-Linked Annuity?
With annuity rates currently at very low levels is it worth looking at alternative ways of securing and protecting your income in retirement rather than just taking out a standard or conventional annuity?
Remember that if you do purchase a standard annuity at say 65 you have tied yourself in to a flat or indexed income for the rest of your life. So with rates at such a low level is there any way to benefit from any upturn in the markets in the future?
There is an option to link an annuity to an investment that means that the fund continues to be affected by movements in that investment. These types of annuities are known as investment-linked annuities and most commonly are unit linked annuities or with profits annuities. Obviously linking into investments does build in some uncertainly and means in some cases that your income in retirement will increase in line with performance but conversely you may experience a reduction if investment performance is not a good as expected. Many providers have built in some form of guarantee that limits the downsides and provides a minimum income level but there is no getting away from the increased risks associated with these types of investment-linked annuities.
Traditional annuities may still be the best approach for the majority but for some the risks and rewards of investment-linked annuities may be worth investigating with their Independent Financial Adviser.
Author: Robert Trapnell- Right Retirement
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