Unlike a traditional annuity where the retiree hands over their pension funds in exchange for a known income for the rest of their life, the Invested annuity comes with a variable level of income.
This type of annuity will usually give a higher starting income but maintaining that income, will depend on the annual performance of the funds invested.
The starting income chosen will come with a "required fund performance" or ABR (Anticipated Bonus Rate) this is the amount the underlying fund must grow by each year to maintain the starting income and is between 0 and 6%.
Whether the income goes up or down depends on the performance of the fund invested in but will never go below a guaranteed minimum income level.
Increased income is paid to those with poor health when the annuity is purchased. How the income is received from an annuity can be tailored to the individual requirements of the annuitant.
Income options include monthly, quarterly, half yearly and yearly advanced or in arrears, see more on your income options here - Income Options.
The ABR (Anticipated Bonus Rate) is the required fund performance to maintain the starting level of income. Where a lower ABR is selected the starting income will also be lower, however the required fund performance will also be lower meaning there would be a higher prospect of future increases to pension income.
Where a high ABR is selected the starting income will be higher but then there is a higher likelihood that the fund might not achieve this higher amount and therefore income could go down.
Death benefits available on With Profits Annuities are the same as for traditional annuities. Please see Spouse's or dependents pension and Guaranteed Period (death-benefits)
Just Like traditional annuities a selection of income payment periods can be selected. Please see Income Options (death-benefits) One option that is not available on With Profits annuities is escalation.
Invested annuities could be for people who:
Invested annuities are NOT for people who:
Want certainty of income even if this means a lower starting income.
Want a simple solution to retirement income.
Do not have a higher appetite for investment risk.
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