Alternatives To Buying An Annuity
What are the alternatives to buying an annuity?
There are two main alternatives to buying an annuity that are now available, these are capped drawdown and flexible drawdown. Capped and flexible drawdown are both types of pension drawdown.
Capped and flexible drawdown have replaced unsecured and alternatively secured pensions as of April 2011. If you were already a part of a unsecured or alternatively secured pension plan by that date you will eventually have to use your remaining fund to either buy an annuity or transfer to a capped or flexible drawdown scheme.
Capped and flexible drawdown:
As and alternative to taking an annuity you may instead opt into a capped drawdown plan, allowing you to keep your pension fund invested while taking an income if you need to. The amount that you take as an income can be anywhere between 0% and 100% of the limit set for your age by the Government Actuaries Department.
Flexible drawdown is similar to capped drawdown, but there is no limit to the amount of income you may take. However, you must meet the government Minimum Income Requirement (MIR) of £20,000pa before you will qualify. The MIR is the minimum income you must be receiving from other registered pension sources.
Taking an alternative option to buying an annuity can have a significant impact on your retirement, and there may be a certain amount of risk involved in taking a pension drawdown. You should always consider all available options before proceeding.
For a full pension annuity and retirement review, and impartial advice speak to the independent annuity advice team from one our partner firms for a free no obligation initial consultation.
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