Investment-linked annuities

Money Advice Service

An investment-linked annuity is a type of lifetime annuity where your retirement income varies to reflect changes in the value of investments such as stocks and shares. So while you can benefit from stock market growth, there’s also a risk that your income could fall. However, all investment-linked annuities guarantee a minimum income.

Types of investment-linked annuity

Investment-linked annuities carry a risk. If you’re considering this option, make sure you could afford to see your retirement income go down.

Investment-linked annuities can either be:

  • With-profits annuity – this means your income is linked to the performance of the annuity provider’s with-profits fund
  • Unit-linked annuity – this means your income is linked to the funds you specifically invest in

If you opt for a unit-linked annuity, you will usually have to choose from a range of different funds containing different investment assets.

All investment-linked annuities have a guaranteed minimum income floor.

This is the lowest level to which your income could fall in times of poor stock market performance.

It’s a good idea to ensure that you would still have sufficient income to live on if your investment-linked annuity income fell to this level.

Income features you can opt for

With investment-linked annuities, as with basic lifetime annuities, you can choose:

  • To have the income paid to someone else after you die – called a joint-life annuity
  • ‘Value protection’ where your estate gets back any remaining unused value of your pension pot when you die
  • Higher rates if you have a short life expectancy due to poor health or lifestyle – called an enhanced annuity
  • Guarantees about how long your pension will pay out if you die sooner than expected – called a guarantee period

Not all providers will offer these options.

We recommend you get financial advice to help you compare what’s available – see the later section on getting advice.

Charges for investment-linked annuities

Some of the more complex investment-related annuities have higher charges than a basic lifetime annuity.

These will effectively reduce your income in retirement.

Get specialist financial advice if you’re considering buying an investment-linked annuity – see the later section on getting advice.

An adviser will weigh up how any charges might affect your income.

Other things to think about

To understand what happens about tax and tax relief when buying a lifetime annuity (including investment-linked) or passing one on when you die see our guide ‘Using your pension pot to buy a lifetime annuity’.

Get advice before taking out an annuity

Once you take out an annuity you can’t change your mind – and it’s just one of several options you have for taking your pension.

So it’s important to be sure it’s the right choice for you.

If you’re actively considering an investment-linked annuity we recommend you speak to a financial adviser.

You can find FCA registered financial advisers who specialise in retirement planning in our Retirement adviser directory.

Your other retirement income options

For an overview of all of your options and to find out where to get help and advice, including free government-backed guidance from Pension Wise, see our guides below.

This article is provided by the Money Advice Service.

Some important information about Rest Less Money

We want you to understand the positives, but also the limitations of using our site. We operate in a journalistic manner and therefore all information, guidance or suggestions provided are intended to be general in nature, and you should not rely on any of the information on the site in connection with the making of any financial decision.

When we set out to build Rest Less Money, we wanted to be a trusted place where you could find helpful information about financial matters affecting the over 50s. As a free to use resource, we try hard to provide the best information we can, but we cannot guarantee that we won’t occasionally make mistakes. So please note that you use the information on our site at your own risk, and we can’t accept liability if things go wrong.

Key things to remember when using Rest Less Money:

We do not offer financial advice – As a journalistic site, it’s important to know that we do not provide financial advice. You should always do your own research before choosing any financial product so that you can be certain it is right for you and your specific circumstances. If you are in any doubt, please seek professional financial advice from a regulated financial advisor.

No Liability – please note that you use the information on Rest Less Money at your own risk and we can’t accept liability for how you choose to use the information given on our site. We will often provide links to content or products and services available on other third-party websites. These are provided purely for your convenience and we cannot be held responsible for any content, or any of the products and services offered on any website that we link to.

 

Accuracy of Information – We try to make sure that all the information provided on Rest Less Money is correct at the time of publishing as we want it to be the most helpful resource possible. Sadly, we are not perfect however, and so we can make no guarantees as to the completeness, accuracy, adequacy or suitability of the information available on the site.
Whilst we work hard to try and provide accurate information, deals and prices can change, so whilst they may be correct at the time of writing, providers may subsequently decide to alter them later – so always double check first.

A final note on the Rest Less Community Forums – always remember that anyone can post their opinion on the Rest Less Community Forums, so it can be very different from our own opinion and may not be factual or well researched. Always be wary of any content posted on the forums and be sure to do your own research and due diligence on anything suggested. 

We hope you find Rest Less Money a useful resource and we would welcome your feedback at [email protected] on how to make it even better. For more information on any of the above you can read our full terms and conditions.

Some important information about Rest Less Money

We want you to understand the positives, but also the limitations of using our site. We operate in a journalistic manner and therefore all information, guidance or suggestions provided are intended to be general in nature, and you should not rely on any of the information on the site in connection with the making of any financial decision.

When we set out to build Rest Less Money, we wanted to be a trusted place where you could find helpful information about financial matters affecting the over 50s. As a free to use resource, we try hard to provide the best information we can, but we cannot guarantee that we won’t occasionally make mistakes. So please note that you use the information on our site at your own risk, and we can’t accept liability if things go wrong.

Key things to remember when using Rest Less Money:

We do not offer financial advice – As a journalistic site, it’s important to know that we do not provide financial advice. You should always do your own research before choosing any financial product so that you can be certain it is right for you and your specific circumstances. If you are in any doubt, please seek professional financial advice from a regulated financial advisor.

No Liability – please note that you use the information on Rest Less Money at your own risk and we can’t accept liability for how you choose to use the information given on our site. We will often provide links to content or products and services available on other third-party websites. These are provided purely for your convenience and we cannot be held responsible for any content, or any of the products and services offered on any website that we link to.

 

Accuracy of Information – We try to make sure that all the information provided on Rest Less Money is correct at the time of publishing as we want it to be the most helpful resource possible. Sadly, we are not perfect however, and so we can make no guarantees as to the completeness, accuracy, adequacy or suitability of the information available on the site.
Whilst we work hard to try and provide accurate information, deals and prices can change, so whilst they may be correct at the time of writing, providers may subsequently decide to alter them later – so always double check first.

A final note on the Rest Less Community Forums – always remember that anyone can post their opinion on the Rest Less Community Forums, so it can be very different from our own opinion and may not be factual or well researched. Always be wary of any content posted on the forums and be sure to do your own research and due diligence on anything suggested. 

We hope you find Rest Less Money a useful resource and we would welcome your feedback at [email protected] on how to make it even better. For more information on any of the above you can read our full terms and conditions.

Share on facebook
Share on twitter
Share on linkedin
Share on whatsapp
Share on email

Join Rest Less Money Club

Helpful tips and guidance for making the most of your money – straight to your inbox

By providing us your email address you agree to receive emails and communications from us and acknowledge that your personal data will be used in accordance with our Privacy Policy and Terms and Conditions. You can unsubscribe at any time by following the link in our emails.

Join the Rest Less Money Club

Helpful tips and guidance for making the most of your money – straight to your inbox

Good luck with your application

Before you go, we’d love to stay in touch to find out how you get on. Sign up to Rest Less today to get free job alerts and inspiring content sent straight to your inbox.
By providing your email you agree to receive emails and communications from us and acknowledge that your personal data will be used in accordance with our Privacy Policy and Terms and Conditions. You can unsubscribe at any time through the link in our emails.