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Fixed Term Annuity Rates & Providers

Pays you a regular annuity income for a set period of time

If you are currently uncertain about buying a lifetime annuity, you could consider a fixed term annuity which pays you a regular income for a fixed period of time. You can choose the amount of annuity income you receive and specify your preferred term between one and 25 years.

At the end of your specified period, if you haven’t consumed the whole amount, it pays you a guaranteed amount known in advance. At maturity, you can reassess your retirement needs and use this maturity amount under the pension freedoms to buy another fixed term annuity or invest in another retirement income product, such as a conventional annuity or enhanced annuity if your health has deteriorated, or take it all as cash, subject to income tax.

Any income or lump sum you take in excess of your tax-free cash entitlement will be added to your other income in that tax year and potentially subject to tax at your highest marginal rate. Therefore, if you wanted to take your whole pension as a cash lump sum, this means you could have to pay tax at the highest rates (40% or 45% in tax year 2018/19).

Alternatively, after tak­ing your tax-free cash, you could use a fixed term annuity to potentially minimise tax by taking all the balance as a regular amount of income over several tax years without any guaranteed maturity payment. You may therefore benefit from paying tax on your annuity income at a lower rate.

Ask one of our Annuity Specialists for more information about fixed term annuities, and a comparison table showing the highest annuity rates available for this type of annuity from the UK’s leading annuity providers. Call us now on 0800 652 1316.

Risks

  • Income from Guaranteed Maturity Amount (GMA) may be lower at end of term than that available from a conventional annuity today.
  • If you are interested in buying an annuity when the term expires, rates might be lower.
  • Inflation will reduce the value of your future income.
  • Less flexible than Drawdown as your income is fixed for your selected term and the GMA does not enjoy potential investment growth.
  • Withdrawing all your savings might leave you with inadequate future income.
  • You need to be sure of the tax payable on your withdrawals.
  • Taking an income could result in a reduction of your annual allowance for making pension contributions.

 

Benefits

  • Regular income for a fixed term enabling you to budget accurately or withdraw the whole fund during the selected term, potentially more tax efficiently.
  • Guaranteed Maturity Amount without investment risk.
  • Flexibility by allowing a change of options if your future circumstances change.
  • Potential for higher income at the end of the term if your health has deteriorated or if future annuity rates increase.
  • Option of taking tax-free cash without taking any income.
  • Choice of cost effective lump sum death benefits.
  • Legal & General and LV= only: option to transfer out at any time for any reason. For example, if you were to suffer from ill health and then qualify for an enhanced annuity.

What's next?

Retirement Options

Annuity calculator

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