Variable or ' Third Way' Annuities
These are relatively new products to the UK, which are growing in popularity as they offer an income whilst keeping funds invested.
The products usually provide some in-built guarantee protecting pension savings from falls in value whilst allowing some investment growth potential and the opportunity to annuitise at some point in the future.
Variable annuities are usually subject to the legislation for Unsecured Pensions, but the main difference between a variable annuity and an unsecured pension is that the funds are protected by a guarantee. So, if investments fall, income will not drop below a guaranteed minimum.
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Variable Annuities
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Pros
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Cons
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| If your investments rise, income may rise as well. |
The guarantees come at a high cost which may make this product uneconomical for many people. |
| If investments fall income will not fall below a guaranteed minimum. |
There is no guarantee that future income will be as high as that offered by a conventional annuity purchased today. |
| Any future annuity purchase can be tailored to reflect your client's circumstances at that time. |
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