Fixed Term Annuities
A Fixed Term Annuity (FTA) is an investment within a drawdown plan which provides guaranteed income payments for a set number of years.
At the end of the term there will be a guaranteed maturity payout which can be reinvested in an annuity or a drawdown plan.
The policy can be set up on a joint life basis and with a guaranteed income period or value protection option. This means that on death before the policy matures, income payments will continue to a surviving spouse / partner or a lump sum less 55% tax can be paid depending on the options chosen.
At present the following companies offer Fixed Term Annuities:
- Just Retirement
- Prime Time
Fixed Term Periods
Most providers offer two types of Fixed Annuity. A plan for a set number of years, (minimum term of 3 years), or a plan to age 75. Both plans have the following features:
- Guaranteed income to the end of the selected period, subject to legislative limits
- Choice of income level at outset, from nil up to the maximum allowable under current legislation
- Guaranteed Maturity Amount at the end of the plan term
- Choice of flexible death benefits
Advantages and Risks
- If your future circumstances change you have the flexibility to choose the appropriate options when your plan reaches maturity
- You may benefit from the opportunity potentially to obtain a higher income in the future if your health has worsened during the term of your Living Time Plan
- Fixed Term combines some of the advantages annuities with some of the advantages of drawdown
- If you die before the end of the plan term the maturity amount will not be payable unless you have selected death benefit options.
- The amount of annuity income will be dependent upon annuity rates at that time, which may be better or worse than current rates
- Fixed Term plans are NOT suitable for those who want the certainty of a guaranteed fixed income for the rest of their lives
- Past investment performance provides no guide to future performance
Pensions: Annuity rates 'starting to rise' - BBC website - BBC website
A 'third way' between annuities and drawdown - Billy Burrows
Annuities at a tipping point - Billy Burrows looks at the case for investment-linked annuities
Low annuity rates must prompt pensions rethink - BBC Website
An annuity is a serious business - Billy Burrows writes for Bestinvest
MGM Advantage sold to TDR Capital - Posted by Billy Burrows
How to make the most of your annuity - ABI Code - By Teresa Hunter in the Telegraph
It's about more than just price shopping - Billy Burrows - Financial Adviser
Annuity Update - February 2013 - Billy Burrows
FSA to investigate pensions annuity market amid fears - Julian Knight - The Independent