With annuity rates at a record low and certainly no sign of recovery in the short term retirees are looking for more flexible retirement income options. The With Profit annuity is an Asset-backed annuity that invests in the with profit fund and if the underlying assets perform well then retirement income increases by the addition of bonuses. The converse of course applies that if the underlying assets of the with profit annuity provider perform poorly then bonuses may not be declared and retirement income may actually fall.
Who are with profit annuities for?
These with profit annuities are available to everybody and can even be provided on an enhanced annuity rates basis if the annuitant qualifies. However, they do suit those with larger funds and prepared to accept the risk that income may fall. Of course some retirees may choose to put a percentage of their pension fund into the with profit annuity, many retirees choose to put 75% of their pension pot into guaranteed annuities and the remaining 25% into asset-backed annuities.
With a with profit annuity you choose an Annual Bonus Rates (ABR) at the beginning and if this rate can be sustained by the performance of the underlying assets of the fund then your income level will remain intact. it is important to note that the fund is not your own fund as with income drawdown, but pooled with other investors.
Which annuity providers offer with profit annuities?
With profit annuities are available from the likes of Prudential, Legal and general and LV= to name a few.
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