Falling stock markets are rightly seen as the primary threat to those about to take their pension benefits and indeed also for those in receipt of pension drawdown income in their retirement. In the current climate, market timing becomes almost impossible and to an extent it becomes something of a lottery as to where the market will close on any given day - not an ideal scenario for those whose pension income depends upon investment returns.

Fortunately, there are ways to protect pension funds against the full force of stock market movements; thorough and regular reviews of your appetite for risk or a strategy known as 'lifestyling' being just two such ways. It is always important to remember that just because the FTSE may fall by 5%, invariably your pension fund may not mirror this return if your investments are suitably diversified.

Nonetheless, when markets stumble, it is our older clients who are most concerned and it is not atypical to be addressing retirement funding more than any other topic.

The double edge comes in though when considering the benefits of selecting to draw an annuity rather than a more investment based income in retirement. Historically annuities have been regarded as the safer, more sanguine option for investors who have had enough of uncertainty and want to see their life savings wrapped up in a 'one way bet'. I use that phrase loosely, because in our opinion annuities should never be regarded in such a way, as the decision to draw an annuity over drawdown or an alternative solution can often be just as complicated, certainty can have it's drawbacks as well. Let us not forget that we are all living longer and our pension funds need to last us that much longer in turn.

In August 2011 annuity rates hit their lowest level since 2000 and with interest rates predicted to remain at historically low levels, prospects for an upward turn in annuity rates appear slim.

So what does this mean for those approaching retirement. Well in short, it means that there hasn't been a worse time to buy an annuity based solely on rates for over a decade. The arguments for annuities will always remain; flexibility over spouse's benefits, guaranteed terms, index linking options, enhanced rate options; and in fairness the annuity market has tried to be one of the more innovative areas for new product launches as providers realise the need to bring added functionality at a time when the certainty of a low income for life is less attractive.

There is no definitive solution, as there never is when considering product recommendations, but the need for independent advice to assist in deciding which retirement path is right for you has probably never been so important. The headlines will always pick a winner and loser, annuities taking the latter prize at present, but to think in those terms is to oversimplify and generalise individual's needs. Retirement could last a long time and it is important that you understand all your options to decide which ones suit you best rather than just which headline drives your decision.

Pensions Whether you are an existing pension investor or seeking to invest in pensions for the first time, Moore Stephens Financial Services can help you. Find out more

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