What is a fixed-term annuity and should you get one?

Credit: Getty AN annuity is a way of turning your pension savings into a regular income in retirement. It provides certainty, but the structure and flexibility depend on the type of annuity you choose. A fixed-term annuity can help boost your income over a time that suits you in retirement. Credit: Getty With interest rates remaining attractive and lifetime annuity rates hovering at competitive levels, thousands of retirees are looking for guaranteed returns, without locking themselves in for good. Here is everything you need to know about fixed-term annuities, how they work, and whether one could power your retirement plan. Sign up for the Money newsletter Thank you! What is a fixed-term annuity? A fixed-term annuity is a pension product that pays you a guaranteed income for a set number of years – usually between 3 and 10 years (though some run up to 25). At the end of this term, you’ll receive the bulk of your lump sum back as a Guaranteed Maturity Amount (GMA). The GMA is the amount that remains from your original pension fund once the income payments have been taken into account. You can then use this maturity amount to reassess your options once your term has ended. In total, the amount you receive from both the regular payments and the GMA will be more than what you originally put up as a lump sum. Fixed-term annuities also continue to pay out if you die during the term. Usually, you will select a beneficiary to continue receiving the repayments. Speak to Pense and explore your options in retirement Why use a fixed-term annuity over a lifetime annuity? Flexibility to change your mind: Annuity rates change, and your personal circumstances will too. A fixed-term policy lets you reassess your retirement setup in a few years’ time. Health upgrades down the line: If your health deteriorates as you get older, you may qualify for a higher-paying enhanced annuity when your fixed-term ends. Bridge the state pension gap: Planning to retire at 60 but your State Pension doesn’t kick in until 66? A 6-year fixed annuity can provide guaranteed income to bridge the exact gap.(Note: Remember that the minimum normal pension age is rising from 55 to 57 in April 2028). Speak to Pense and explore your options in retirement How much will I get from a fixed-term annuity? Annuity quotes are personalised, and fixed-term quotes often depend on the length of the term and the size of your lump sum among other variables. It’s also worth shopping around and comparing your quotes to find the best rate. An easy way to do this is to set up a free consultation with our preferred advisers, Pense, who can run a whole of market, free and without obligation search on the type of annuity rates for you. Get FREE pension advice and boost your pot by £1,000s *If you click on this link we will earn affiliate revenue Sticking with your current provider could cost you thousands of pounds in retirement. That’s why Pense is offering free pension advice for people with pots of all sizes – whether it’s a drawdown or annuity. Speak to one of their specialists to get a detailed breakdown of your options. Book your free consultation NOW Pense Ltd is authorised and regulated by the Financial Conduct Authority number 231629.