Fixed Term Annuity

Keep your options open with a 
Fixed-Term Annuity

Fixed-Term Annuities are more popular with retirees than ever due to the flexibility of the product.

Read more about fixed-term annuities and get a personal quotation to see if one could be right for you.

Fixed-Term Annuity

Following the changes made in the 2014 Budget along with the current pandemic, fixed-term annuities are more popular with retirees than ever. A fixed-term annuity allows you to retire now, taking the tax-free lump sum (if required) and then take an income of your choice for a set number of years. This can be anything from 1 years upwards. At the end of the term, a Guaranteed Maturity Amount (GMA) is paid and this can be used to buy an annuity based on future annuity rates which may be higher (although you don’t have to).

The main benefit of a fixed-term annuity is that it allows you to keep your options open - you avoid locking into a lifetime annuity at the outset. When the term ends, you can shop around again for whatever type of pension product suits your circumstances at the time. At that point your health and lifestyle which may have deteriorated, as well as your increased age and this will be taken into account to possibly entitle you to a better rate.

A fixed-term annuity allows those retiring now to access their tax-free cash and income, but defer making a decision as to how they take their income from their pension fund in the long term. However in the short term the tax-free cash can be used to pay off debts or for a one off purchase such as a holiday.

How a Fixed-Term Annuity Works

Below is a working example of a fixed-term annuity, figures are estimates to give an illustration, for exact figures use our online calculator.

Amount Invested

After taking tax free cash, £100,000 is invested in to a 5 year fixed-term annuity.

Income for the next 5 years

£7,650 is paid to the annuitant every year for the next 5 years, this income can be taken monthly if required.

Guaranteed Maturity Amount

A guaranteed maturity amount (GMA) of £72,181 which is set at the time of purchase is returned to the annuitant to reinvest in to another annuity or something else.

Health as we age

Fixed Term Graph

Ageing is among the most important known risk factors for most chronic diseases. Around 100 000 people worldwide die each day of age-related causes. The graph to the left shows how as we age, more chronic diseases become prevalent.

A fixed-term annuity allows you the opportunity to be re-assessed based on your future health.


Fixed-Term Annuity Key Facts

  • The term can be from 1 - 20 years but are typically 3, 5 or 10 year plans.
  • You can come out of most fixed-term annuities at any time within the term - terms and conditions apply.
  • You can take the tax free cash as a lump sum, without taking any income.
  • At the end of the fixed term the GMA can be invested in a traditional annuity, flexi-access drawdown or even another fixed-term annuity. Tax Free Cash needs to be taken (if required) when the fixed-term annuity is set up as this option is not available at maturity.
  • A range of death benefits can be selected to a Fixed Term Annuity just like those for a traditional annuity spouse's or dependents pension. See annuity options. The Guaranteed period must not exceed the term of the Fixed Term Annuity.
  • Just like a traditional annuity a selection of income payment periods can be selected. Escalation of income is not available on Fixed Term Annuities.

Get a personalised fixed-term annuity illustration for your pension pot

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