Quick Guide to how an Asset-Backed Pension Annuity works

This type of pension annuity is one where your pension annuity fund is typically invested in either unit linked or with profits investment funds and the level of income that you receive is linked to how well the investments perform and (in respect of With Profit pension annuities) the level of bonuses awarded each year by the pension annuity provider. There is potential for your income to increase however there is also a risk that your future income may reduce.

If you are prepared to accept some investment risk with your pension annuity purchase and would like to discuss this option further please inform us and we will pass your enquiry to a qualified specialist authorised to deal with your request.

Past performance is not a guide to the future and your income could go down during periods of volatility in the stock markets.

What should I bear in mind before making my decision?

All financial products carry risk. It is not the purpose of this brochure to detail all the risks involved in the products mentioned above. You will find full details of all the relevant benefits and risks in the ‘Key Features Documents’ we send you with your personal illustrations. However, some of the key points to take into account include:

What will happen to pension annuity rates in the future?
Rates today are at historically low levels. Some experts believe they will rise again in the future while others think they could fall still further. Whether you lock yourself in to today’s rates or leave your options open with a more flexible product could hinge on your personal attitude towards this question.

Will I always want or need the same shape of income and benefits?
Life can change and this is certainly true during the retirement years. Are you happy to set your level of income today for the rest of your life or would you like the option to revisit this at a later stage in retirement? This too could depend on your view of the future trend of pension annuity rates.

Will I always be healthy?
Statistically speaking your health is likely to deteriorate during the latter part of your retirement. Some people want to delay investing in a Lifetime pension annuity as long as possible in the hope that they can benefit from an impaired or enhanced pension annuity rate later on, but there is no guarantee that you will qualify for a better rate or that you will end up financially better off even if you do.

Do I want to take investment risk?
Some people like absolute surety in retirement and do not want to take any risk with their pension annuity fund, others are happy to take a certain degree of risk in the hope that they will benefit from stock market growth.

Once you have decided what type of pension annuity to go for, the next choice to make is the type of options and benefits you want to build in to your plan. Generally speaking, the more options you build in the lower the annual income will be.

An asset-backed pension annuity can give you greater flexibility with retirement income if you accept the risks.