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Your choices at retirement

2nd September 2012

When you reach retirement age, with interest rates at historic lows, your most important choice will probably be between taking an annuity or using an unsecured pension product to defer that decision, potentially indefinitely. The former will lock in a guaranteed income for you, whereas the latter option allows you to stay invested, at least partly, whilst you decide whether markets will get better - or worse - and whether you should actually take the plunge.

An annuity is specifically designed to provide a guaranteed income stream for life. This provides security and stability but does also mean you give up all right to the original capital. Without any guarantees, if you die earlier than expected, your descendants could be left with nothing. With an unsecured pension you can retain entitlement to the capital but draw an income from it until you decide annuity rates are attractive enough to replace it. However, this latter option might provide less than you would receive from an annuity whilst you wait.

Unsecured schemes offer access to a wide range of underlying investment funds, so you can assess the risk you are prepared to take and allocate your fund accordingly. Or, indeed, you might decide to combine the two approaches, keeping part of your fund invested whilst taking an annuity with the rest. If you would like to discuss this options in greater detail please contact us.

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