Article preview: In the past, the standard approach to using a pension pot was to take an entitlement to a tax-free cash lump sum (typically 25% of the value of the pension pot) and then buy an annuity with the balance of the fund. An annuity (sorry that word sounds like a piece of jargon) is simply a device for converting capital into a lifetime stream of guaranteed income. For a lot of people entering retirement, guaranteed income sounds like an important thing to have. However, annuity rates today are much, much lower than they have been historically. Therefore the amount of guaranteed retirement income provided by each £1,000 of a pension fund is much lower than say a decade ago.
Do people still buy annuities?
This 453-word blog post explains the role of the annuity in retirement income planning. Written on 20th December 2019.
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