Annuities explained – Rest Less

There are many factors to consider when deciding whether to go for an annuity or drawdown plan, or a combination of the two. Here are a few things to keep in mind.

With a drawdown plan, when you die, all of the money in your pension pot will pass into your estate automatically. However, this is not the case with annuities, so you will have to take specific action in order to ensure that your beneficiaries receive any money after your death.

With an annuity, the level of income you’ll receive is decided by your provider, which will take your age, your health, the size of your fund and various other factors into account. This is not the case with a drawdown plan, where you are free to adjust the size and frequency of your payments as you wish. Drawdown plans offer a lot of flexibility and the option to switch to an annuity later on, but once you purchase an annuity, you are committed to it.

One major advantage of annuities, however, is that they can guarantee your retirement income for a longer period than a drawdown plan. If you are hoping to have a long retirement and aren’t sure whether the money in your pot will cover it, then you could use this money to purchase a lifetime or long-term annuity, so you won’t have to worry about your funds running out.

Another advantage of an annuity is that there is no investment risk. Under a drawdown plan, your funds will be invested and your income will vary depending on how well your investments perform. With an annuity, on the other hand, your income will be guaranteed, unless you have specifically chosen an investment-linked annuity.

Author: wpadmin

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