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Unit Linked Annuity
Unit linked annuities are where your money is invested in funds determined by your attitude to risk. The more risk in the underlying fund that you choose the more risk that your income will fluctuate.
Some Unit Linked policies work on the same basis as the With Profits annuity, in that they work on an ‘assumed growth rate’, where you determine the amount what you require the fund to grow at, in order to achieve the level of income you require. If the fund then does better than this, you will get a higher income and if it doesn’t you will get a lower income.
The other way that Unit Linked annuities work is where there is no ‘assumed growth rate’ and your income simply depends on how the underlying fund in which the investment is made is performing. The 3 most common funds would be the medium risk fund, high risk fund or the tracker fund.
The disadvantage with this type of annuity is that there is a higher initial charge in addition to overall charges, which may reduce the amount of income that you receive. However, the advantage is that if the fund does well you could have a substantially higher income than you would in investing in any of the other annuities.
This annuity should only be considered if you are able to sustain large fluctuation in your income.
If you would like to discuss this further then please contact us to speak to Retirement Options adviser.
