The Pros and Cons of Annuities: Are They Right for You?
The good things about annuities
Choice and personalisation
You can tailor your annuity income to your personal circumstances. There are lots of choices for tailoring your income, such as:
If you have a health condition that could shorten your life, your medical information could potentially get you a higher income.
Be aware, the more features you add the lower the starting income will be.
Simplicity
Once the annuity is set up there's nothing else to do - you can just sit back and spend the money.
Not-so-good things about annuities
Lack of flexibility
Once an annuity has been set up it can't be changed, so it's important to get it right in the first place.
The income can stop when you die
Depending on what kind of annuity you choose, the income can stop completely when you die, with nothing left over. You can choose an annuity that pays a pension to someone close to you, but that will stop when they die. Or you can choose value protection, where you protect part or all of your pension savings as an amount to be paid to your beneficiaries when you die – so they get this amount, less the pension payments you’d already received.
Potential lack of value
The amount of yearly income you’ll get from an annuity can look low compared to the amount in your pension pot. But remember: the income is paid for the rest of your life (or a fixed time). If you multiply your annuity by an estimate of the number of years you expect to live, it could look quite different.