Until April , the most common way for people to use their pensions to provide an income over the course of retirement was to buy an annuity. Six reasons to switch your pension today. The money you get from an annuity can never run out: This income will remain at the same level and it will not fall if there is a stock market crash, say. Some annuities — known as index-linked annuities or rising annuities — pay a higher monthly amount every year in order to counter the effects of inflation.

But this feature comes at a cost, and income in the early years will be lower than with a level annuity.

The Pros and Cons of Immediate Annuities

If you suffer from a medical condition, such as heart disease or diabetes, you could be entitled to a higher annuity income due to your lower life expectancy. Read our guide to reviewing your pensions.

Pros And Cons Of Investing In Annuities

Once you have entered into an annuity contract, you generally cannot change your mind and cash it in although there are plans to allow annuities to be sold in some circumstances — the government is currently consulting on how such a system would work. As a result of the financial crisis and rising life expectancy, annuity rates today are about as low as they have ever been. If you left your money invested in the stock market, you could make considerable gains if share values rise — this could help provide a more comfortable retirement.

Of course, the opposite is also true, and you could lose money and see your income and savings diminish.

If you opt for a level annuity, your income can lose much of its spending power over time as a result of inflation. Want to find out more about investments? Read our beginners' guide.

Are annuities worth it? Weighing up the pros and cons.

If you have no other savings or assets, buying an annuity with at least some of your pension can help provide a guaranteed income that, combined with your state pension , covers your basic living expenses.

If you have other sources of retirement income, on the other hand, you may be happier to take more risk with your savings and carry on investing in the stock market. If you are retiring soon you may be able to get more retirement income through the Saga Annuity Service, click here for more details. Find out how you could access more retirement income from your pensions. Shareholder services Close Money home. Our Products Investments Back Overview Saga Investment ISA Share Dealing Pensions SIPPs.

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Saga Credit Card Saga Savings Saga Share Dealing Saga Investment Services. More From Saga Holidays Insurance Care Health Lifestyle Magazine. Saga Money Retirement Income Service The pros and cons of annuities. Are annuities worth it? Weighing up the pros and cons Are annuities still a good investment for your retirement income?

AARP Lifetime Income Annuity with Cash Refund from New York Life and Annuity Corporation

We weigh up the pros and cons of buying an annuity with your pension fund. The pros and cons of buying an annuity with your pension fund. So what are the advantages and disadvantages of annuities? Do they still have a role to play? Higher income for people with health problems If you suffer from a medical condition, such as heart disease or diabetes, you could be entitled to a higher annuity income due to your lower life expectancy.

Your annuity strategy If you have no other savings or assets, buying an annuity with at least some of your pension can help provide a guaranteed income that, combined with your state pension , covers your basic living expenses. The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make or refrain from making any decisions. Always obtain independent, professional advice for your own particular situation. You may be interested in. The Saga Care Funding Advice Service, provided by Just Retirement Solutions Limited.

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