Annuities are by far the most popular retirement products, in this article we look what a Unit Linked Annuity and who it is suitable for Unit Linked Annuity Plans.
With this type of plan the initial pension and future income levels are dependent on the performance of the unit linked funds invested in.
Normally the investor also has the option to assumed a future rate of growth.
The higher this rate of growth rate the higher the income.
However if the actual growth does not meet this assumed rate then the level of income could be reduced.
The advantages of a unit linked annuity is that you will receive an income for life, you can also opt for your spouse or beneficiary to receive a cash lump sum or income upon your death.
This type of plan is also simple to understand and there is minimal paperwork to complete.
The disadvantages is that because the plan is linked to a unit linked fund, which means that the level of income is not guaranteed but this could also mean that the level of income could be significantly increased if the fund performed well.
Also any benefits on death must be decided at the outset and any decisions made at the start cannot be changed after.
A Unit Linked Annuity would suit individuals who want some kind of guarantee their pension income but would also like the potential of some future investment return.
Individuals with low to medium risk would suit this type of annuity plan who also have a relatively small pension fund.