If you're prepared to accept an income that could fall, but want the potential to have an income that could rise then you might want to consider an investment linked annuity. There are two basic types - a unit linked annuity and a with profits annuity.

A with-profits annuity is generally considered to be a lower risk than a unit linked annuity, and also the one that is likely to be less volatile. Whereas the unit linked annuity offers potentially greater returns, although the level of risk will ultimately depend on the type of fund selected, as you could select a high risk or low risk fund.

With-profits annuities - There are four main providers who offer this product, all of which are very well known and established insurance companies. Their plans work in a very similar way.

• When you take out a with-profits annuity, you select an anticipated bonus rate (ABR).

• This can range from 0% to somewhere around 5%.

• Each year the insurance company will declare a bonus rate

• If the declared bonus rate is higher than the ABR you selected your income will increase.

Click here to find out more about with-profits annuities.

Unit Linked Linked Annuities - There are also a few companies who offer unit linked annuities. The two big names in this market are Canada Life, and the Prudential. Generally the level of risk depends on the underlying funds selected. However, if you opt for very low risk funds you will probably not have sufficient growth to make it worthwhile.

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