This is a type of retirement income which is provided by your employer. They are becoming less common but some companies do still run these schemes or you may have benefits held in an old scheme. These pensions provide you with a guaranteed regular payment for life. Your company has a pension scheme in place which has specific rules that dictate what your retirement income could be. There are pre-set factors in place such as whether your retirement income increases each year and if so, by how much, how long the income payments are guaranteed for i.e. if you die early and also what percentage of your income is paid to a spouse. It may not be possible to change the way your pension is paid under this arrangement even if it does not suit your circumstances – however it is not mandatory to take your benefits with your company pension and you could consider any of the alternative options with this pension.

This is a type of retirement income which provides you with a guaranteed regular payment for life. With this type of policy you decide what features you would like at the outset. 25% of the fund value can be taken as a tax-free lump sum and on the remaining sum a base level income is offered. Additional features can be purchased which will lower the amount of income you receive but offer other benefits instead. Features include whether you want your income payment to remain level throughout retirements or increase each year, what amount you want your payments to increase by, whether you would like to a have a guaranteed payment period (whereby payments continue to your estate or beneficiary in the event of your death) and the length of that guaranteed payment period. You will also need to decide if you want to have a spouse’s pension built in, what percentage of your pension to pay your spouse if you die before them and think about capital protection, which will ensure that a percentage of your pension is paid to your beneficiaries if you die early. Once the contract has been set up it is not possible to make changes to the terms agreed at outset. They provide certainty of income for those that prefer it, but are rigid and therefore not suited to people who want more flexibility.

This is a type of retirement income which provides you with a regular payment for life. With this type of policy your monies are invested in a fund and the level of income you receive can fluctuate upwards or downwards from year to year.

The starting level of income maybe higher than under a lifetime annuity, however this income could fall below what you may receive from a lifetime annuity. The level of income payment is dictated by the investment performance of the fund you have selected and the level of starting income you require. If you take a lower starting income but fund values perform well, your fund value will grow and the level of income you can receive later will also grow. Conversely if you require a higher initial income and funds underperform you could deplete the funds available to you. These types of annuities offer some protection in that a ‘base’ level of income is offered and it is guaranteed that your income will never fall below this amount, irrespective of fund performance.

Similar to the Lifetime Annuity 25% of the fund value can be taken as a lump sum and you can decide at outset whether you want to a have a guaranteed payment period and the length of that guaranteed payment period, if you want to have a spouse’s pension built in and what percentage of your pension to pay your spouse if you die before them and also capital protection which will ensure that a percentage of you pension is paid to your beneficiaries if you die early.

This is a type of retirement income which provides you with a guaranteed regular payment for a fixed period of time. At the end of the fixed term period, it will provide either a guaranteed fund value or a variable fund value – you then have all the retirement options available to you with the fund. However, the options available will be what are on the market at the time which may be different to when you originally invested in a fixed term annuity.

Flexi‐access drawdown is the new term for drawdown pension which allows you to retain control of the investment funds and pension monies and withdraw as much or as little as you want over any period. Just like an annuity, 25% of the fund value can be taken as a tax-free lump sum.

Instead of exchanging your pension for an annuity, it allows you to draw a variable taxable income directly from your pot, which remains invested through a pension plan. This, however, does not need to be taken in one go and you can ‘crystallize’ proportions of the fund as and when you require it.

Because your funds remain invested, Flexi-Access Drawdown offers the potential for growth through investment and a chance to protect income from inflation. It also enables you to pass your pension fund on to loved ones (tax-free in some circumstances). For many, this control and flexibility give drawdown its appeal, but it does come with increased risk.

You are also able to make further pension contributions subject to certain criteria.

If you die with funds remaining in a drawdown plan your beneficiaries will have the option of continuing to take a drawdown pension, buying an annuity or taking the remaining fund as a lump sum.

The taxation of death benefits depends on your age when you die. If you die under age 75 any drawdown income, annuity income and lump sum payments will be paid out tax-free. If you die on or after your 75^th birthday any income payments will be taxed on the recipients at their marginal rate and any lump sum payment is taxed at 45% in 2016/17 (expected to reduce to the recipient’s marginal income tax rate(s) from the year after).

It is not necessary for all of the benefits to be taken from a personal pension at the same time (subject to any restrictions the product provider may impose). Some personal pensions are arranged not as single plans, but as clusters of many smaller separate plans, sometimes called ‘segments’.

The segments can then be used to buy annuities or converted into drawdown pension at different times. It is no longer necessary for a personal pension to be physically split into segments in order to take benefits at different times – the pension provider would just need to be informed how much of your pension fund you wish to take benefits from. The process described above is known as ‘phased retirement’ (or ‘staggered vesting’).

Until recently the UK retirement market had been dominated by providers of conventional lifetime annuities and drawdown pension plans but new products are increasingly emerging which attempt to combine the certainty of a conventional annuity with the prospect of investment growth seen with drawdown pension to offer the best of both worlds.

Typically, flexible (variable or third way) annuities fall into two main categories:

• Annuities with flexibility ‐ these are similar to conventional lifetime annuities i.e. payable throughout lifetime but with a degree of income and/or investment flexibility.
• Short term annuities – these provide a guaranteed income for a short period of time with a guaranteed or reviewable maturity value.

A third category which is made up of drawdown pension products with income guarantees is also available.