Annuities Or Drawdown - Open Market Option Vital To Help You Decide
Pension annuity rates change frequently and are around an all-time low point for over a decade
, this fact makes it so important to shop around at retirement to find the best annuities. Once you reach the age you can retire, currently age 55 and over, you can exchange your accumulated pension fund into a sustainable income for life. There are two options for this retirement income and this is an annuity or drawdown scheme.
Pension annuities are in the main guaranteed lifetime annuities, although there are other types of annuity such as asset-backed and fixed term annuities. Pension annuity rates are determined by your age, gender and health, there are other factors but these are the important ones. Health does not mean you have to be seriously ill or at deaths door, factors such as lifestyle habits and prescribed medication can all mean you may qualify for enhanced annuity rates.
Drawdown schemes allow you to defer annuity purchase and keep your accumulated pension fund invested. This is much more risky than buying a guaranteed annuity where you know how much income you will get for the rest of your life. The income you take comes from the invested fund therefore if the fund does not grow at a pace that replaces the income you have drawn then you may not be able to sustain the income for the rest of your life. The risks aside drawdown plans are much more flexible and allow you to vary the income from 0 to 120 percent of the single life level annuity equivalent you can take with a lifetime annuity.
The open market option was introduced to give retirees an opportunity to shop around with their accumulated pension fund to buy annuities or take advice and decide on other types of annuity or drawdown. The annuity rates that you can buy from the open market vary enormously from provider to provider and can be as much as 20% difference between the best and the worst rates.