Fixed-Term Annuities Redefine Retirement Income

Fixed-term annuities offer a middle ground between risk and security, expanding options for retirement income.

Fixed-Term Annuities Redefine Retirement Income

A fixed-term annuity pays out for a set period, usually five to ten years, with a lump sum at the end. In today’s market a £100,000 pot could yield a 9% annual rate during the term and return about £77,690 at maturity, compared with a lifetime annuity paying around 7.75% for the same setup. Providers include Canada Life, Legal & General, LV Insurance and Standard Life, and many plans let you choose death benefits or a guaranteed maturity amount. The product is pitched as a balance between investment risk and guaranteed income, with optional features that shape what you get if you die early or at maturity.

Shoppping around is essential because fixed-term annuities use longer dated assets to fund payouts, and rates reflect supply, demand, and market yields. Savers can select different term lengths and decide whether they want income only, income plus a payout at maturity, or a lump sum at the end. They can also choose joint life options so a surviving partner continues to receive income. The trade off is that growth potential from stock markets is limited and there are terms that could affect future options if personal circumstances change.

The move toward fixed-term annuities shows how savers respond to shifting interest rates and policy changes. As rates rose, these products offered a clearer path to reliable income without locking buyers into a lifetime commitment. Yet they add complexity, including choices on death benefits and the fate of funds if life circumstances change before maturity. Financial advisers say fixed-term annuities are a sensible middle ground for those who want certainty during the term and flexibility after it. The broader question is how consumers will navigate a market where income guarantees sit alongside drawdown options and evolving regulatory views on retirement products.

Highlights

Retirement planning remains personal and situational, not one-size-fits-all.