Up until very recently the UK retirement market has been dominated by providers of traditional annuities and Income Withdrawal plans but new plans are starting to emerge which attempt to combine the certainty of an annuity with the prospect of investment growth seen with income drawdown i.e. the best of both worlds. Generally speaking these third way annuities fall into three main categories;
- Annuities with flexibility – these are similar to traditional annuities ie payable through out lifetime but with a degree of income and/or investment flexibility.
- Fixed term annuities – these provide a guaranteed income for a set period of time with a guaranteed or reviewable maturity value. These plans mature at age 75 when either a conventional annuity must be purchased or alternatively secured pension is selected.
- Income Withdrawal with income guarantees – these are similar to Income Withdrawal plans but with some level of underpinning income guarantee which will continue no matter how the underlying investment performs. Some plans provide an income for life whilst others either have to purchase a conventional annuity at age 75 or elect for alternatively secured pension.