When it comes to your flexible pension options, what works for other people may not work for you – and vice versa. Here, we have outlined some of the advantages and disadvantages of annuities to help you decide.
- The income from an annuity is guaranteed, so you won’t have to worry about running out of money.
- There are a broad range of annuity options, enabling you to select the one that best suits your circumstances.
- If you live multiple decades after purchasing the annuity, your insurer may pay out more than was originally in your pension pot.
- If you have a health condition, you may be eligible for a higher level of income.
- If your spouse/partner does not have adequate pension provision, a joint life annuity will ensure they are provided for when you are no longer around.
- Unlike other flexible pension options, like drawdown, your pension funds won’t be subject to investment risk.
- Annuities are less flexible than other options, such as drawdown. There is no way to vary your monthly payments, nor can you withdraw more or less money according to your needs.
- Once you have purchased an annuity, there is no going back or possibility of a refund. You must be sure that this is the right course for you before proceeding.
- If you were to die a week after buying your annuity, your insurer would take the rest of the money. This could potentially leave you with little to nothing to pass on to your family.
- The income you receive is dependent on current annuity rates, which have reduced in recent years.
- With most annuities, there is no potential for future investment growth.