Fixed-term annuities
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What is a
fixed-term annuity?
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Benefits and risks
Benefits
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Guaranteed income
With a fixed-term annuity, you can ensure you have a secure level of income for between 1 and 25 years, allowing you to budget more accurately. -
Fixed maturity amount
At the end of the fixed-term annuity you will generally have built up a guaranteed maturity amount, which you could use to take as a cash lump sum, subject to income tax, buy another fixed-term annuity, or buy an enhanced annuity should your circumstances change. -
Benefits for your spouse
With a fixed-term annuity, your fund is protected, in the event of your death, to enable you to pass on either a lump sum or continuing income to your spouse or nominated beneficiary. -
No investment risk
A fixed-term annuity is a form of drawdown, however, unlike a normal drawdown, you will receive a guaranteed income, which means there are no decisions to make about investments and no investment risk.
Risks
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Can't benefit from better rates
Income from the guaranteed maturity amount may be lower at the end of the term than that available from a conventional annuity today. -
Can't amend your annuity
It's important to shop around for the best rate as once you have purchased your annuity, the contract typically cannot be changed. Some providers, however, allow you to opt-out of the contract, subject to a financial penalty. -
Value of your income may reduce
Inflation will reduce the real value of the income from a level annuity over time. -
No option to invest
There isn't an opportunity to participate in future investments and therefore you won't benefit from a growth in your pension fund.
What customers say
Don't just take our word for it, hear what customers have to say...
Professional Service
My Annuity Specialists made it a very pleasant experience, with a professional service. Would recommend to anyone.
James Duckworth
Very Impressed
Very impressed with the service and wouldn't hesitate to recommend. My annuity specialists were both very professional and kept me updated each step of the way
Nigel Khan
10 out of 10
Very smooth and helpful. I was kept informed through the whole process. Also completed well within the expected timeframe. 10 out of 10 for service and information.
Holly Weston
Best value annuity
Secured me the best value annuity from my pension pot. Sorted all the organisation. The money started reaching my bank account at exactly the estimated time. The service was friendly, accurate, honest and helpful.
Tony Stamford
Better deal than I hoped for
Very pleased with the service and efficiency, and overall competence. Got a better deal than I hoped for and organised speedily with no hassle. Would recommend to anyone looking for a good deal.
Susan Walters
Better quotes than other agents
Plenty of advice given regarding different pensions available, and even spent time with me over enhanced quotes and better quotes than other agents.
Robert Newbold
Answering your questions
Still unsure of a few things? We've got you covered with a few simple answers to some of our most frequently asked questions.
A fixed-term annuity is a temporary annuity that generally pays you a regular income of your choice for an agreed time, typically 5-10 years. You'll typically accrue a 'guaranteed maturity amount' when your annuity ends. You can use this lump sum to buy another annuity, fixed-term annuity, open a drawdown facility, or take it as a cash lump sum, subject to income tax.
When you buy an annuity, you can cash in some or all of your pension in return for a guaranteed income in regular fixed payments. You can choose the level of annuity income you receive and specify your preferred term between one and 25 years.
At the end of your term (if you haven't consumed the whole amount), you will accrue a guaranteed sum, known as a guaranteed maturity amount.
The rate you receive directly impacts the income you get and the maturity amount you receive once the annuity ends. The lower the monthly payments you opt for could leave you with a more substantial maturity amount at the end of your contract.
A fixed-term annuity is flexible as you can decide on many features, such as the length of your fixed-term, whether you'd like a single or joint plan and additional add-ons. These extra features can include death benefits, inflation protection and so on.
The benefit of a fixed-term annuity is that once your contract comes to an end, you can invest in another retirement product, keeping your options open instead of investing in a lifetime annuity straight away.
At the end of your fixed term, you can use the maturity amount to invest in another annuity, such as a conventional annuity or an enhanced annuity, or take the cash as a lump sum, subject to income tax. You could also use the lump sum to invest in a pension drawdown.
Fixed-term annuities do not invest in equities and, therefore, you cannot lose money with them - there is no investment risk.
They can be a good option if you are looking for a safe way to receive a guaranteed income of your choice with your retirement savings.
They are generally unaffected by the economy because of their guaranteed interest rates and security.
It is important to note, that whilst there is no investment risk to an annuity, there are other factors to consider, such as inflation risk and the value of your pot over the course of time.
If you have a defined contribution pension, you can pay up to £40,000 a year (or 100% of your salary) into a pension scheme and receive tax relief on your contributions, known as your Annual Allowance.
If you take from your pension (not including tax-free cash), the amount you can pay into a pension without paying a tax charge reduces to £4,000 per annum. This is known as the Money Purchase Annual Allowance (MPAA).
MPAA only applies to your and your employer’s contributions to defined contribution pensions and not defined benefit pension schemes.
The MPAA is not typically triggered for small pension pots (valued less than £10,000) or if you take a tax-free cash lump sum and buy a lifetime annuity that provides a guaranteed income for life.
Different providers offer varying options and rates, so you should shop around for the best deal. Our selected annuity specialist has established trusted and long-standing relationships with the UK's top providers, which means they can help secure preferential rates on your behalf.
Your existing pension company may not offer a fixed-term annuity as an option, therefore, you should shop around to get the best terms. You can use our Fixed-Term Annuity Calculator for a quote today.
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