We know that the life annuity is the only financial contract in existence that provides retirement income security for however long a pension plan member lives. We also know that in a low nominal interest rate environment annuities are perceived to be poor value for money. This is because the income from the annuity is related to interest rates at the retirement date. Plan members find themselves switching suddenly from an equity exposure to an interest-rate exposure. The government made a

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... concession in 1995 when it permitted personal pension plan members to delay the purchase of an annuity from retirement age to a maximum age of 75 (1995 Finance Act). Instead, plan members could implement an 'income drawdown' strategy, whereby they could keep the fund fully invested in higher returning assets (mainly equities) and draw an income from the fund of between 35% and 100% of the corresponding annuity up to a maximum age of 75, at which time a life annuity has to be purchased with the residual assets.