Know your annuities
STANDARD ANNUITIES
Level Guaranteed
Description: Income payable at the same level for life.
Risk: Practically nil. However, the flat level of income will be eroded by inflation so the ‘real’ value of your income may fall below the level you require.
Escalating Guaranteed
Description: Income payable will increase in line with your chosen percentage or index. Due to the accumulated cost of providing increases, your starting income level will be lower than a level annuity.
Risk: Practically nil. However, the fixed percentage rises may not match inflation.
INVESTMENT LINKED
With Profits
Description: Your annuity income is linked to the performance of the chosen with-profits fund.
Risk: The income payable in future years can fall. However, there is a minimum level, below which your income cannot fall. The actual level of income in future years will depend on bonuses, which are related to the performance of the with-profit fund chosen.
Unit Linked
Description: Your annuity income is directly linked to the performance of the chosen unit linked fund (or funds). You have to option to change the funds you invest in.
Risk: Your annuity income can fall as well as rise. Unit-linked funds are more volatile than with-profits funds, so variations in income are more likely, especially over the short term.
Self Invested
Description: Your annuity income is linked to the performance of the permitted investments and funds you’ve chosen. Within limits, you can change the investments.
Risk: Your annuity income can fall as well as rise. The risk of income falling will depend on your choice of investments.
Flexible (Income Drawdown and phased retirement options)
Description: you choose the income level between permitted limits. Income in future years will depend on investment performance. Death benefits can be higher than other annuities.
Risk: Your annuity income can fall as well as rise. If you choose to take a low level of income, and depending on what dependant benefits are payable, you may receive a lower total payout.
