Until recently there were mainly conventional lifetime annuities (lifetime Annuity) and drawdown pension plans. However, new products are now emerging. These combine the certainty of a lifetime annuity, while still being able to grow, as in drawdown. These are called Fixed Term Annuities.
By using a Fixed Term Annuity, you may draw between 0% to 150% of a level annuity income. This can be single life or a joint life. It depends which was bought.
Fixed Term Annuity Categories
Fixed Term Annuity contracts, have two main categories. Plus a third, which is made up of drawdown with income guarantees.
- Annuities with flexibility. These are like lifetime annuities, but they also have some income and investment flexibility.
- Fixed term annuities. These give a guaranteed income for a set period. Also, they have a value at the end of the term.
- Drawdown with income guarantees. Whilst like standard drawdown plans. They do have some income guarantees. Some guarantees are for lifetime income and others for a set period.
Advantages of a Fixed Term Annuity
Disadvantages of a Fixed Term Annuity
Advantages or disadvantages depend on the details of the specific Fixed Term Annuity product used.