Here I explain how to get the guaranteed income of a pension annuity without losing the flexible access and death benefits of drawdown.
⏰ TIMESTAMPS ⏰
0:00 Start
1:26 Why Are Annuities Becoming Popular Again?
3:12 The Problem With Pension Annuities
4:10 The Benefits of Fixed Term Annuities
7:01 Fixed Term Annuity Quote Examples
🎬 WATCH NEXT 🎬
Improve income sustainability in drawdown:
👇 LEGAL & GENERAL FIXED TERM ANNUITY QUOTES 👇
**** ABOUT THIS VIDEO ****
Many people are drawn to the guarantees offered by lifetime pension annuities for retirement, but are put off by the loss of flexibility compared to flexi-access drawdown and other flexible retirement withdrawal methods.
With pension annuities, you have to choose death benefits and other options like inflation linking at the start without knowing what the future is going to hold, and these options cost money.
With pension drawdown, you can choose your level of income and have complete flexibility, as well as the ability to leave your whole pension pot to whoever you choose when you die. But drawdown does not guarantee that your income won’t run out during your retirement like an annuity does.
Fortunately, there are plans that exist called ‘fixed term annuities’, which allow you to receive the guaranteed income benefits of conventional retirement annuities, with the ability to choose a maturity value at the end of the fixed term. You are able to go back into drawdown after the term has ended, which is never possible with conventional pension annuities.
I explain the benefits of fixed term annuities in this video, which could be of use in your own pension and retirement planning.
**** DISCLAIMER ****
The content in this video is provided for information and entertainment purposes. It should not be construed as direct or indirect financial advice. You must throughly research any potential financial or investment decision and fully understand the risks before taking it. If in doubt, you should seek individual advice from a professional adviser.
**** AFFILIATE LINKS ****
Some product links are affiliate links which mean if you sign up or buy something I’ll receive a small commission.
🌎 WEBSITE 🌎
For regular tips on how to build tax free growth and income, visit and subscribe to my blog… it’s FREE and there is exclusive content for members:
📱 FOLLOW ME ON SOCIALS 📱
Insta:
FB:
Twitter:
LinkedIn: …(read more)
LEARN MORE ABOUT: Retirement Annuities
REVEALED: How To Invest During Inflation
HOW TO INVEST IN GOLD: Gold IRA Investing
HOW TO INVEST IN SILVER: Silver IRA Investing
Want Annuity Certainty with Drawdown Flexibility? Here’s How
When planning for retirement, it is important to consider options that provide both security and flexibility. Annuities have long been a popular choice as they offer a guaranteed income stream for life. However, in recent years, people have started seeking options that provide annuity certainty with added drawdown flexibility.
What is annuity certainty?
Annuity certainty refers to the guaranteed income that an annuity provides for a specific period, typically the remainder of someone’s life. This regular income can be crucial in ensuring financial stability during retirement, covering essential expenses such as housing, food, and healthcare. Many individuals opt for annuities to secure a fixed income and avoid the risk of running out of money in their later years.
Why consider drawdown flexibility?
While annuities offer security, they often lack flexibility. Once you purchase an annuity, it is difficult to change the terms or access your lump sum capital. This rigidity can be a drawback for those who might require additional funds for unexpected expenses or want more control over their retirement savings.
Drawdown flexibility, on the other hand, allows retirees to access their pension savings as and when they need them. It provides the freedom to withdraw money as a lump sum or gradually over time, while still maintaining the potential for investment growth. This flexibility can be invaluable in adapting to changing circumstances or fulfilling personal goals during retirement.
So, how can you achieve both annuity certainty and drawdown flexibility?
An innovative solution that brings together annuity certainty and drawdown flexibility is a hybrid product known as a flexible annuity. This product allows individuals to allocate a portion of their pension pot to a traditional annuity, providing a guaranteed income for life, while the remaining portion remains in a drawdown arrangement.
The flexible annuity combines the best of both worlds. It offers the peace of mind that comes with annuity certainty, ensuring a stable income that will last throughout retirement. Simultaneously, it allows for drawdown flexibility, granting control over the remaining pension funds.
Furthermore, the portion allocated to a drawdown arrangement allows retirees to access these funds as needed. This is particularly beneficial for unexpected expenses, covering healthcare costs, or indulging in hobbies and travel. Flexibility in drawdown also provides the opportunity for retirees to preserve or grow their investments, giving their retirement funds the potential to increase in value over time.
It is important to note that flexible annuities may have varying terms, so it is essential to carefully consider the features and options available. These can include the ability to change the annuity income level or switch between different investment strategies for the drawdown portion. Seeking advice from a qualified financial advisor is recommended to ensure the product matches individual retirement goals and financial circumstances.
In conclusion, a flexible annuity offers the best of both worlds—annuity certainty with drawdown flexibility. By combining the security of a guaranteed income with the ability to access additional funds as needed, retirees can enjoy financial stability while still maintaining control over their retirement savings. With careful consideration and advice from experts, individuals can achieve their desired balance of security and flexibility in their retirement planning.
Thanks for watching guys. I have included a link to the quote site used in the description by the way for those interested in exploring this option for themselves.
This is the best video I have seen on this subject – Very good. Thank you.
Great video. I've been mulling over the idea of annuities recently. Coupled with the state pension together with a final salary with a previous employer both index linked. This could be just be what I'm looking for!
do you pay tax on the lump sum at the end? presumably yes, or this seems too good to be true
This sounds good but they require you to be at least 55 years old to start getting paid. I wish we could get that when we retire early to gap the time between now and when goverment pension kicks in when we're 69 years old or so. That would be handy to give peace of mind against unemployment risk so we know we can afford at least rent, utilities and food. Any product that does that?
Bonds are only paying well for short term, can't get a guaranteed 25 year rate of 5% (even the American CDs are paying 4.7% and foreigners from EU have a lot of unrecoverable income tax withheld in US so we can't earn that income tax free, therefore we get less than 3%). I also wonder if the lump sum we give to the insurance company / bank is insured by the government if they run out of money (otherwise, if we're taking risk, they can just go bankrupt if interest rates are lower and insufficient to sustain those income levels or if they mess up) and if it leaves our personal assets balance, as we forfeit access to it for the duration of the plan. The latter would be VERY helpful for frugal savers on low incomes that might regain access to benefits like rent subsidies and other benefits that are cut off when you "saved too much" even if you survive on very low incomes (or are unemployed) that are much lower than the income limits for those (the governments wants people to spend, so annuities could be a handy loophole to the "you should use your own money before getting help" policy).
Thanks for the content!
Great video. I’m just starting to give my pension more thought. Started it at 23 with only small monthly contributions and now I’m 38 and just started upping them. As it stands I’m single with no kids so if that’s still the case when I want to retire annuity looks a good option for me as nobody that I’d want to leave a substantial amount to. When’s a good age to start getting professional advice from someone like yourself, late 50’s?
Yes, I had Pensionwise suggest the fixed annuity option last year as a bridge of certainty to cover the period upto getting my state pension in 7 years time! Since then though, the idea of creating a "bond ladder" for this period to give this certainty also appeals. This would give the additional benefit of changing tack to mitigate against taxation changes, albeit a more complicated/hands on approach. Any thoughts?
Many thanks for this – much appreciated.
Hi Chris, great video, certainly something to think about. May I ask, for the example quote from L&G you used, did you ask for monthly income paid in arrears? Also, if you took the guaranteed period option and the plan holder died before maturity of the plan, do you know whether the benefits are outside the plan holder's estate and treated in the same way as a SIPP?
I have just read that moving from a SIPP to a QROPS pension if at or near the LTA means no 25pc charges to pay ever when over the LTA. UK still eligible but maybe not for long. I am amazed by this, could you perhaps do a video on the topic if familiar?
Excellent video Chris. I never knew such a product existed.
Is the payout rate affected by age? eg taking out this product at 55.
Cheers Chris this was very informative, so although I don't wish to retire from my current job until I am 60 could I place a private pension into this scheme next year when I'm 55 until I'm 60 and take it as an income with a lump sum of money at the end to reinvest?
Nice thought, to be able to dip in and out when required. My thoughts were that annuities were dead.
Are these Fixed Term Retirement Plans available in the USA?
What coloured jacket do I need to buy???
Hi there… I am sure I am missing the trick there. I got a pension, that is my work pension that I top every month. Now… Can I open a second pension if I do not have any other precious job contributes?
Informative as ever. Can you purchase an annuity with a combination of pension funds and cash say from an isa
Really interesting and useful video Chris, thank you. I'm emailing you at virtualfinanclinic as I'd like to discuss if I could benefit from commissioning a ifa/planner professional review (retirement planning/investing in retirement) from you. Thanks
Great video … is this a new style of annuity created as a reaction to the pension freedom rules or have they been around for quite a while?
Thanks for giving some very useful food for thought Chris. I’d resigned myself to the fact that nothing with a guarantee came close to the benefits of flexi-access drawdown but that looks very interesting. I’ve just gone through the quote with L & G and, obviously, it’s early days with much more advice needed but my immediate question is about the maturity value. The quote says “maturity value before tax”. Do you know what is the tax paid on the maturity value? Why should it be taxed if it’s return of capital?
Can someone tell me why information on annuities is so hard to find? There little that is freely available on the internet other than basic level annuity rates.
Chris, so could all a fixed term annuity be purchased with all the funds of a pension pot (without taking any cash tax free), then later on maturity of the fixed term annuity 25% cash taken tax free?
Thank you Chris. I never liked the idea of handing my pot over for a life time annuity, but this seems like a great option in a declining drawdown market.
mmm. seems like these could really give you shelter from the storm of volatile markets.
Another fantastic video from the Brad Pitt of financial advisors. Now this i really need to think about…thanks Chris!
Excellent video. Wasn't aware of this option. I had been looking at using part of my pot for a lifetime annuity and rest as drawdown but this looks a better option for me. Thanks
Thank you excellent explanation
Thanks for that Chris. I never knew such a product existed. I've just retired and have a decent sized cash pot to get through and I'm putting my pension into a SIPP deposit account but this kind of product would be perfect for me after I get through my cash. If I can make inflation plus 1 or 2% in the medium / long term and at very low risk then I'd be happy with that and sleep a lot easier at night!
Would this income be taxable from the annuity if running along side a works pension of 20k per annum?
So you can put pension money into an annuity for a fixed period then return it to your pension at the end of the fixed period?
Awesome educational video, Chris. This will be new information for many people looking for retirement income options.
Using some of my pot to buy an annuity now, ahead of time, to lock in a fixed guaranteed income for life to pay out from 55 (I am 52) would be perfect, do you think these rates will last another 3 years?