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Invested Annuity

Invested annuity works by anticipating a growth rate of the investment fund from the outset of the plan and offers you a retirement income based on this. During the plan this growth will be reviewed and a bonus rate calculated. If it achieves its growth rate, the income you draw as a regular payment may go up – but if it falls short the income can go down.

The good news; your annuity is subject to a set minimum that it will never go below. Its great advantage is that in a rising market, your income may also rise. It’s for people who understand investments and can accept losses.

Pros

  • A rise in the stock market could mean an increase in your pension income.

Cons

  • Just like a regular investment, your income could go down as well as up.

Risk

Medium

How an invested annuity works

you use your pension fund to buy an invested annuity (also known as ‘with profits’). the fund is invested on your behalf in the stock market. your invested annuity will pay you a gauranteed minimum income for the rest of your life. the actual income you receive is based on the bonus rate you choose at the outset, and the actual bonuses added each year. You can also choose to pay an income to a dependent when you die.

Risk and reward

The higher the anticipated bonus rate you choose, the greater the risk that your income will go down. Your income could fall, possibly below your starting level but not below the minimum guaranteed amount. It’s worth bearing in mind that you cant cash in your invested annuity, even if your personal circumstances change, but you can convert to a conventional annuity at any point after the first plan anniversary.