Purchasing Annuities For and Against
Welcome to the Income Drawdown Section!
When approaching retirement and thinking about income drawdown it is important to look at all the factors. Look into death benefits, flexible drawdown, new rules, comparisons with annuities, tax free cash, the best providers, and IHT.
If you take an annuity young (especially early retirement) income may be much lower than if you went into Drawdown and took the annuity older. There are also inheritance tax benefits to drawdown. As with all investment decisions you must balance risk and reward . Income from drawdown is at the mercy of fund performance. ID is normally only appropriate if you have £100K+ in your pension pot.
- They are uncomplicated
- Once you purchase an annuity you have a guaranteed form of income
- There is no possibility of this income ever running out
- Annuities are available regardless of the size of your pension pot
- You will not have to undergo reviews
- There are no investment risks so the falls in share prices have no effect on them
- Once you purchase an annuity, they can never be changed. This inflexibility is a major turn-off for many investors
- If you have not set up a value protection annuity, it is unlikely that you will be able to pass it on to your spouse/beneficiary
- Due to the current economic climate, annuity rates are low and do not represent great value
- If you are setting up spouse’s benefits, this money is lost in the event of your spouse dying first
- With the economic climate set to pick up in the next few years, your annuity will not benefit from any share price rises that occur