In the event of your death there are three options:-
- Your spouse or dependent could use the fund left and buy an annuity.
- Your spouse or dependent could use the fund and draw income from it.
- The fund could be paid as a lump sum to anyone you choose, after a 55% tax charge.
It is normally expected that you would be content to invest some of your funds in stocks and shares. This is because they have generally provided the higher investment returns over the longer term, and this allows your fund the opportunity to outperform the guaranteed income that would have been paid from an annuity.
Your eventual pension income will depend on how your fund grows, how much income you take out of your fund and the level of annuity rates in the future. You no longer have to buy an annuity at anytime.
Because you are not locking yourself into an annuity and the choices you make when arranging an annuity, in terms of when you think you or your spouses may die, this is an opportunity to benefit from increased flexibility as your circumstance change in the future.
For more income drawdown advice please find below a link to The Financial Services Authority’s guide.