Why are fixed term annuities becoming more popular?

Canada Life has reported a 123% increase in sales of its Fixed Term Income Plan (FTIP) in the first half of 2026 compared with the same period in 2025, highlighting growing interest in fixed term retirement income.

The rise comes as more people approach retirement looking for ways to turn their pension savings into a reliable income without necessarily committing to a lifetime annuity straight away.

As with other fixed term annuity products, Canada Life’s FTIP can provide a guaranteed income for a set period, with the option of a guaranteed lump sum at the end of the term. 

For example, a Canada Life illustration shows that investing £100,000 in their fixed term plan for ten years could provide a guaranteed annual income of £5,417, with the original £100,000 returned at the end of the term.

That’s one example of how fixed term annuities work. Now let’s look in more detail at your options and why they might appeal as you explore your pension income or investment choices.

What is a fixed term annuity?

Fixed term annuities provide a guaranteed income for a chosen period, typically 1–30 years, rather than for the rest of your life. This offers certainty over your income while allowing you to reassess your retirement plans when the term ends.

They also give you the option of locking in a guaranteed maturity amount (GMA). This is a lump sum payment you receive at the end of the term. You can take this as cash, use it to buy another annuity, or invest it in a drawdown plan - or pick and choose from these and other options.

As with other annuities, you can normally take up to 25% of your defined contribution (money purchase) pension savings as tax-free cash when you set up a fixed term annuity. You can then use some or all of the remaining pension fund to buy an income for the fixed term.

The income is guaranteed for the agreed period, so it won't drop if interest rates or investment markets fall. However, this also means you won't benefit from any potential rises in annuity rates or investment returns during the term.

Another option is to take your 25% tax-free cash and set up an annuity that pays you no regular income. Instead, you can opt for all of the remaining 75% to produce the GMA lump sum at the end of the fixed term.  

Why are fixed term annuities gaining popularity?

Fixed term annuities may be benefiting from the wider appeal of guaranteed retirement income. Annuity rates have risen in recent years, meaning more guaranteed income for consumers who choose an annuity.

Additionally, one of the main attractions of a fixed term annuity is the opportunity to ‘buy time’ before deciding what to do with your pension for the rest of your retirement.

For example, some people use a fixed term annuity to retire (or semi-retire) before their State Pension age. The annuity income ‘bridges the gap’ between now and when you start to receive your State Pension.

For others, a fixed term annuity is a way to keep your options open. You can review your circumstances when the term ends and decide whether to take another route, such as drawdown or a lifetime annuity. 

Meanwhile, some people will be attracted by the GMA option. It means you can lock in a guaranteed lump sum return on your pension savings without worrying about stock market ups and downs in the meantime. 

As Canada Life’s Retirement Income Director, Nick Flynn, explains, these products are ultimately “designed to provide a steady income over a set timeframe, whilst retaining the future flexibility to choose the product that best suits your needs at the end of the term”.

Is a fixed term annuity right for you?

A fixed term annuity won't be right for everyone. It depends on your overall pension fund, income needs and what you want your retirement to look like.

The biggest appeal may be the balance between certainty now and flexibility later. You can secure an income for a set period without making a lifetime commitment, then reassess your options when the term comes to an end.

However, there are trade-offs to consider. Because your income is fixed for the agreed period, you won’t benefit from any future increases in annuity rates or investment growth during the term. 

Something else to consider is that you won’t benefit from an enhanced annuity rate and income on account of a qualifying health condition. You can only qualify for enhanced rates on lifetime annuities.

Helping you explore your options

Our Annuity Specialists will be happy to discuss your lifetime and fixed term annuity options. They can also prepare personalised quotes from leading annuity providers at today’s best annuity rates. These will show examples of the income or future lump sum you can lock-in with your fund. 

If you’re looking to explore your annuity options, call our friendly team today on 0800 652 1316 or request a call back.