The fixed-term annuity introduced in 2005 is self-evident. They act as a classic pension and pay a guaranteed annual salary with a one-time payment. However, in the case of a fixed annuity, income is paid only for the agreed fixed period and not for a lifetime like a standard annuity.
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So why may you consider a fixed term as opposed to a standard lifetime annuity?
Fixed-term annuities allow you to keep control of your pension rather than locking into a mate for life, so in theory that you may be able to secure a higher income in 10 or 15 years when you come to purchase another form of retirement income. Your income could be increased due to changes in circumstances over the fixed period, for example, if:
Annuity rates increase
Your health deteriorates allowing you to qualify for an enhanced annuity which would offer a more favorable annuity rate as your life expectancy may be reduced.
The annuity rates will improve and you will be able to increase your retirement income at the end of your fixed term. The information contained in this article is for information purposes and should in no way be treated as advice.