An investment-linked annuity takes the money you have built up in your pension pot and reinvests it to provide you with a regular income.
Investing has a higher risk Investment-linked annuities invest in stocks and shares, which means the value of your fund and the income you receive from it can go down as well as up.
You will be accepting a level of investment risk that is not the case with conventional annuities, either standard or enhanced. With standard or enhanced annuities, the company providing the annuity takes on all the investment risk and you take a guaranteed income for life.
Is the income guaranteed? Investment-linked annuities by their very nature do not provide a guaranteed level of income for life – the amount you will receive will change depending on the performance of the funds in which you are invested. Often however they provide a guarantee that you will receive a minimum level of income if the investment performance of your fund has been weak.
Who might consider this type of annuity? Investment-linked annuities tend to be more popular with those people who have generated larger pension pots and who can afford to take greater risks on the stock market.
Read about the advantages and disadvantages.
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