Annuities Vs Drawdown

Annuities or investment freedomOne of the biggest financial decisions that you make in your life is how you will survive and get a steady income after you retire.

You have to think about all your options while you are still up and working and decide how you are going to be spending your retired life. Two types of investment options are prominent, the first one being annuities and the second one called drawdown.

A drawdown arrangement is basically part of your pension fund invested in a wide range of assets such as equities and bonds whilst the remaining pension fund is held in cash to provide your income. Drawdowns could be perceived as potentially more risky compared to the certainty of annuities because of the underlying investment performance of drawdown.

Income DrawdownAn annuity on the other hand provides certainty as it guarantees to pay you for a specified period of time and is usually paid with a lump sum of cash in the beginning. Most people choose to purchase an annuity for the certainty of the income compared to drawdown.

Income drawdowns are very complex and would require the help and assistance of a pension advisor who will better be able to guide you towards which option is for you. Annuities on the other hand are fairly simple but you have to make sure that you shop around at several different places in order to get the best annuity rates. The key is to never rush into making a decision. Your pension takes decades to save up so it would be wise for you to spend a couple of days or months figuring out the best option for you.

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