subject: Annuity Alternatives [print this page] Many people buy annuities once they have retired. However, reasons such as poor life expectancy and increase of impending rates will push you to decide not to buy one. Its not too late to change your mind; you can take a risk and look at the annuity alternatives.
Earlier, at the age of 75, you had to buy an annuity. But now, you can avoid buying annuity by means of income drawdown and you can get an alternatively secured pension.
Here are some details to know more about the following two annuity alternatives.
Income Drawdown
If you are going to use this annuity alternative, you have to get an income directly from your pension when it is invested. Your fund will increase as the investment grows. You have the flexibility over the income that you can take. You can choose to take nothing at all or up to 120% of your annuity income. You also have the freedom to stop income drawdown at any time.
In case you die, the remaining fund will go to your heirs.
Alternatively Secured Pension
This is a more limited type of income drawdown. It requires restricted maximum and minimum amounts of withdrawal.
In case you die, the remaining fund must be used to give an income to a dependant. It cant be transferred to your estate. But, if there is no dependant at all, you can transfer the fund to a friend or family members retirement fund. However, a large tax will be deducted due to the transfer.
Remember that these annuity alternatives entail some serious risks. They are most suitable to those who have a large retirement fund and have other incomes.
If you dont want to buy an annuity, then its best to choose these two annuity alternatives. But it is a complex area where you really need to have a financial advice first. Its much better to consult first than face the risk without having any knowledge
