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Fixed term annuity

A fixed term annuity (also called a fixed term income plan) allows you to buy a retirement income for a set number of years with all or part of your pension pot.

At the end of the specified period you will receive your ‘Guaranteed Maturity Amount’. You can choose to invest in another retirement income product with the maturity amount, or take the money out of your pension.

As you are not tied in for life – in contrast to a lifetime annuity - you retain a certain amount of freedom, but still benefit from the security of knowing how much income you will receive and your ‘guaranteed maturity amount’ at the end of the specified period.

It does however come with risks which you will need to explore before making your choice. If you would like to secure a guaranteed income for life then you may be interested in a lifetime annuity instead.

Fixed term annuities at a glance

  • You choose the term – often 5 or 10 years - although they are available between 3 and 20 years. 
  • You can usually choose to take the first 25% of your pension pot as tax-free cash.
  • Guaranteed income is paid for a set number of years.
  • If you do not require an income then the plan can provide capital growth over the term.
  • At the end of the term a GMA (Guaranteed Maturity Amount) is paid.
  • The maturity amount can be used to buy another retirement income product, such as another fixed-term annuity or a lifetime annuity, or you can take money out of your pension.
  • A range of death benefits can be selected.

How is the Guaranteed Maturity Amount calculated?

The value of the maturity amount is calculated at the start of the plan and is based on the amount of income taken and options selected. Fundamentally the higher the income the lower the maturity amount. This remains part of the pension plan and this means that another retirement option must be selected at the end of the fixed term.

For more information on fixed term income plans, speak to a retirement options specialist

Things to consider

  • The income received is added to any other income you may receive and is taxed accordingly. Tax treatment depends on individual circumstances and may change in the future

  • Once you start an investment its structure cannot often be changed and you do not know the level of income the maturity value will provide in the future

  • At the end of the term you will need to revisit your retirement options

  • Exiting a plan early could lead to your provider charging you a penalty fee

  • Inflation over time can reduce the buying power of any income you are receiving. To offset the effects of inflation you can add an escalation to your plan

  • Our partner will provide you with all the information you need to make the right choice for you​

Need some help?

Your annuity enquiry will be referred and serviced by our preferred partner, who will be able to offer you specialist annuity advice.

If you would like to find out more about a fixed term income plan then why not request for a specialist to call you back to explain your options.
Page last updated: Tuesday 19 July 2022