Traditional annuities provide a guaranteed income in one form or another, however there are other types now available, namely with profits & unitised annuities. They differ from traditional types in as much as the guaranteed element is either reduced, or taken away altogether in exchange for the possibility of increased income in the long term.

With a with-profits annuity, you initially secure a low guaranteed income and then you get annual bonuses from the with-profits fund. These fluctuate from year to year. You can lift the initial income by anticipating the future return of bonuses, kind of betting on them, however if the actual declared bonus rate is then lower, your income will drop, & vice versa.

Under a unit linked annuity, no guarantees are provided. The income you receive is dependent upon the underlying performance of the fund. It can & does fluctuate considerably. With favourable market conditions, a unit linked annuity may, in the long term, produce income that exceeds that of a traditional level or escalating annuity. The problem is that the reverse is also true, adverse conditions could decimate the value of your pension.

Your best bet is to come in and discuss your needs with a financial adviser.