An Annuity may not be best for you - check out the options

If you are considering or are about to take some or all of your Pension Benefits you need to check out your options and NOT accept the first thing that drops through your letter box.

Once you take an annuity you cannot change your mind later on.

Traditionally, when you look to take pension benefits, you would simply exchange your pension fund for an annuity but things have changed for the better and you have far more choice. An annuity is simply a vehicle to provide you with an income so do not be afraid to question what is on offer. Depending on your age, health, marital status and a few other things, including if you want tax free cash, the pension you receive can vary significantly.

Annuities can at best prove to be exceptional value, if you live a long time, or at worst, a rip off if you don't. The value of the return is linked to your mortality and unless you have a crystal ball it can all be a bit subjective.

When you ask your Pension Provider for information about what your pension will give you they will ask you a few questions and send you an annuity quotation. It is highly unlikely that your pension provider will give you the best pension income you can get. They can only advise you on their own annuities and are unlikely to discuss what other options are available.

The choices you have are extensive and the bigger your fund the more the variations in returns and options will be.

If you buy an annuity it dies with you, unless your partner benefits after your death in which case it dies when both of you have. This does not have to be the case. You should consider your pension fund as part of your assets and seek to use it accordingly.

As long as you are over 50 you can take tax free cash from your pension. You do not have to but you can. If you take the tax free cash you do not have to take the income at the same time and can defer that till you are age 75 if you wish. You can also take tax free cash and take some pension income without locking yourself into an annuity. If you leave your funds invested the level of income you choose to take can be altered in line with your needs. You can use your pension fund for your benefit during your life time and then pass it on to your next of kin as an inheritance. Each of these options will come disguised as a product with names like Income Drawdown, Deferred Annuity, Unsecured Pension, Secure Retirement Option and the like but don't be put off by the jargon. These products are designed to enable individuals to have better control and better value.

Yes, all of these things are possible. However, like most things in life, there is no one size fits all solution. Your circumstances, the size of your fund, your attitude to risk and such like all need to be considered carefully and to do this you should seek qualified independent financial advice.

Andy Hawthorne is the Managing Director of Pensionlite Independent Financial Advisers. Pensionlite provide a Free no obligation Pension Review Service. For assistance contact Pensionlite on 01952 614272 or email Pensionlite - quoting reference: PLSD1.

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