Annuities have been around for a long time, because they are an effective retirement investment. Recent innovation has made them even more attractive, and proof against black swan events like the Global Financial Crisis.
An annuity is an investment you buy for a one-off payment, that in return pays you a regular income.
Old style annuities only paid for a fixed term (usually based on average life span) so if you lived longer than average you could be left with no income. Income could also fluctuate with the market. There was no capital return on death.
New style annuities that we now offer provide a guaranteed income for the life of the investor (and his/her partner, if required).
There are two types of guarantee to choose from. One guarantees the initial capital, while the other provides a rising guarantee, as markets rise.
The level of income may rise (if investment markets rise) but will never fall (even if markets fall, or the money runs out).
You also have access to capital (if any) but this will reduce the guaranteed income. There is no loss of capital on death.
There is also a choice of investment options. You are not locked into low yielding, defensive investments, but can choose to have some money invested in potentially higher returning growth assets.
New style annuities are a very safe retirement income investment that provides security against market fluctuations like the GFC and covers you for as long as you live. An annuity can be the base of your retirement strategy, enabling you to invest remaining income in shorter time, potentially higher yield options, but with a guaranteed fall-back position.
