If you are close to drawing the benefits of your pension plan, these are difficult times. Annuity rates remain at historically low levels because people are living longer than ever and long-term interest rates have seldom been lower in the last 50 years. New pension legislation introduced in April 2006 has increased the options available to you at retirement.
So more than ever, specialist advice is an essential first step before you turn your pension fund into tax-free cash and an income that will last throughout the rest of your life.
The main options available to you will be as follows;

Fixed Annuities – If you do not want to take risks with your retirement income, a fixed annuity could be your most attractive option. The company providing the annuity will guarantee payments, regardless of what happens to interest rates, investment markets or average life expectancies. But remember, once you have bought an annuity, it is virtually impossible to change.

An important decision is whether to fix your pension income or whether it should rise at a predetermined rate or be linked to inflation. An inbuilt increase can make good sense, because inflation erodes buying power.

Investment Linked Annuities – An investment linked annuity does not provide a guaranteed income, or any guarantees will be very limited, so future income will fluctuate. This means investment linked annuities are unlikely to be appropriate if they are likely to be your only source of income. But if your pension is just one income source then, by investing in real assets such as shares and property, you have the potential to outperform a fixed annuity.

Pension Fund Withdrawals – here your income is provided by regular withdrawals from your pension fund. Like the investment linked annuity, fund withdrawals involve risk. Although your level of income will usually be fixed for the first 5 years, it could fall after that. So this option is not suited to everyone.