What is a Variable Annuity?

More commonly seen in the US, but growing in popularity in the UK, variable annuities are a type of annuity that offers a sort of halfway house between annuities and income drawdown.

They provide a guaranteed level of income, either for a set number of years or for life, but enable you to keep control of your funds so you can decide where they are invested. This has the advantage that your retirement savings can continue to grow after you retire. Other guarantees are available too, so that you can lock in investment growth, protecting you if markets fall.  There may also be a minimum death benefit, so you can provide a named beneficiary with a lump sum when you die.

The biggest drawbacks of variable annuities are that the guarantees they offer come at a cost, so charges can be steep. They are complex and so you should get pension advice first to see if this type of product is right for you.