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Unit Linked Annuities

A Unit Linked annuity is very similar to a 'With Profits' annuity, with the same features and options. The main difference is in the way your pension fund is invested - in Unit Linked funds.

With unit-linked policies, the investment amount buys units in the fund of the investor’s choice. The value of a policy is measured by the value of the units allocated to it, which is dependent on the performance of the fund(s) in which the money is invested.

Most life company’s have a variety of funds on offer each with different risk and growth prospects. Your initial payout, and future payments received, are dependent on underlying Unit Linked performances.

Often the investor is allowed to assume a future rate of growth. The higher this assumed rate the greater your initial income, however if the actual growth does not match this rate then the amount of pension payable will decrease.

Tax Free Cash

Most types of pension plan have the option of first taking a tax-free cash lump sum before exchanging the residual fund for a series of payments. Once an annuity has been purchased there is no further entitlement to tax-free cash, therefore the decision of whether to access the cash or not needs to be made prior to the annuity selection.

Income

Annuity payments are taxed at source under the PAYE system, and amounts will increase or decrease in depending on fund performance relative to the assumed growth rate.

Death Benefits

The option of what type of death benefits to include must be made at outset. The options available are to provide for a Spouse or Civil Partner / dependent's pension. The spouse's pension can be for the full amount of the original pension or for a specified percentage.

• You can fund a spouse or partners pension for up to 100% of what you received.
• You can guarantee that for a period of ten years after you die your estate still receives your remaining payments.
• You can opt for the capital protection option which means that if you die before the age of 75 your payments minus the gross you already received can be paid out but are taxed at a flat rate of 35%.

Advantages

• You will receive a guaranteed income for life, and you can elect for your spouse to receive a guaranteed income for their life upon your death.
• Tax-free cash is available at outset.
• There are no additional charges applied to the contract once in force. All charges are taken at outset and are reflected in the annuity rate offered.
• The contract is simple to understand, there is no need to review the contract and there is minimal paperwork needed to start the payment of benefits.

Considerations

Your income level cannot be guaranteed. It is also subject to future investment returns. All death benefit options must be selected at the outset and cannot be altered; these can also result in a lower initial payment.

Suitability

If you require a certain amount of security but also want the opportunity to benefit from possible future investment returns, then a Unit Linked annuity may be a good option for you. This type of annuity will suit individuals with low to medium attitudes to risk and security.

Get the full story

Robert Bruce Associates can offer you specialist, helpful and clear advice on these Annuities, to help you make an informed choice. Our qualified advisors will ensure any decision is made only once you have all the facts in hand, and only as a result of establishing your personal wishes and criteria.

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