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There was a time when people in Money Purchase pension schemes (for example, Personal Pension Plans) had little choice: when you retired, you bought a Lifetime Annuity and exchanged your hard-saved pension fund for a guaranteed lifetime income…a once only, ‘no going back’ buying decision.

In 1995, the concept of Income Drawdown was introduced as an alternative to annuitisation before age 75. It was an option regarded as more appropriate for wealthier individuals, giving greater control and flexibility but potentially exposing your hard-saved pension fund to further investment performance risk and fund charges.

Today, there are a plethora of products that sit in between the scale of the low risk/low flexibility of traditional Lifetime Annuities and the higher risk/high flexibility of conventional Drawdown:

Lifetime Annuities
Impaired/Enhanced Annuities
Fixed Term Annuities – the Living Time solution (click here »)
With Profit Annuities
Unit Linked Annuities
Flexible Annuities
Variable Annuities
Phased Retirement
Income Drawdown

PLUS

Equity Release (where possible and appropriate)

To compare the features between Lifetime Annuities, Fixed Term Annuities and Income Drawdown, click here (IFAs only) »

For a copy of the 2008 Sunday Times article - Your 10-point guide to unravelling annuities - click here »

Retirement Options explained »

Click the headings below to get a quick overview of each income option. You should talk to your financial adviser for more details and the relevant benefits and risks of each one.

Lifetime Annuity »

Lifetime Annuities provide a secure income for life in exchange for your pension fund. The income is guaranteed no matter how long you live. Once you have bought a Lifetime Annuity there is no going back and the benefits you secure at the beginning cannot be changed or cancelled.

Enhanced Annuity »

The ability to secure higher annuity rates because of lifestyle issues. For example, someone who smokes may be able to get ‘enhanced annuity rates’ that are higher than those for a non-smoker of the same age, reflecting the likelihood that they will develop smoking-related illnesses later in life and are likely to die sooner than the non-smoker.

Impaired Annuity »

The ability to secure higher annuity rates because of existing medical complaints. For example, someone who has been diagnosed with a serious heart condition may qualify for ‘impaired annuity rates’ on the basis that their life expectancy has been shortened due to their condition.

Fixed Term Annuity »

A Fixed Term Annuity is a type of annuity written under Unsecured Pension (USP) rules. This means it can provide some of the benefits of both conventional income drawdown and traditional lifetime annuities.

Fixed Term Annuities provide a fixed income (subject to GAD limits) for a minimum of 5 years and up to a maximum of age 75. They provide a Guaranteed Maturity Amount if the client survives until the end of the term.

The income payments and other benefits provided by the plan are unaffected by investment performance, but annuity rates could be lower in the future than they are today so your income may fall later on in retirement.

With Profit Annuity »

With Profit annuities combine the advantages of an income for life with the advantages of investing in a with profit fund which is linked to the stockmarket.

With profit annuitants share in the future investment gains (or loses) of the fund and so their annuity income may grow (or fall) in future years depending on bonuses. This is in contrast to traditional (non-profit) annuities where the income is guaranteed but there is no investment growth.

Unit Linked Annuity »

Your income in retirement will be linked directly to the value of an underlying fund of investments. Generally, you can choose from different types of funds that carry varying degrees of investment performance risk.

Some Unit Linked annuities work in similar ways to With Profit annuities, in that your income will depend on a certain growth rate assumption - if investments perform at or above that assumed rate, your income will stay the same or may even increase. If it falls below what is projected, your income could fall.

Flexible Annuity »

A flexible annuity combines the advantages of an income for life with the advantages of a certain amount of flexibility and control over income payments (within GAD limits), investment options and death benefits. Your income may fluctuate as it will be linked to investments which can rise and fall in value and is not guaranteed.

Phased Retirement »

It is possible to set up a Personal Pension Plan that is split into different 'segments' and then encash individual segments or groups of segments (rather than the whole fund) as required to provide an element of tax free cash and annuity income. You can continue to contribute to your Personal Pension if required to help boost your pension fund.

Variable Annuity »

A pension income product that provides some of the flexibility of drawdown (Unsecured Pension) while at the same time providing an element of secure income that is found in an annuity. More specifically, the term is being used to describe Drawdown plans that incorporate some type of income guarantee.

These products usually come with additional charges and investment risk associated with the investments backing the guarantees.

Income Drawdown »

Unsecured Pension (USP) replaced pension drawdown when the new rules for pensions simplification came into force in April 2006. An Unsecured Pension allows you to make income withdrawals from your pension fund until age 75 instead of buying an annuity.

Conventional Drawdown comes with additional fund management charges and investment performance risk.

This site and its content is designed for professional advisers only. It is not approved for use by individual consumers.

Alico is the insurance company that provides Living Time Plans.

Living Time Limited is an appointed representative of American Life Insurance Company (Alico). Living Time Limited is registered in England with company number 04750947 and has its registered office at 89 New Bond Street, London, W1S 1DA. American Life Insurance Company is a private limited company incorporated with limited liability in Delaware, USA number 0123730. Head Office: One Alico Plaza, Wilmington, Delaware, USA 19801. Branch Office: 22 Addiscombe Road, Croydon CR9 5AZ. Registered in England number BR000230. Authorised and regulated by the Financial Services Authority (FSA reference number 139417).

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