Fixed Term Annuity – Income just for 5 years
This is a recent development. It means that you no longer have to commit yourself to a ‘conventional annuity’ which would make a payment for the rest of your life.
You can take your tax free lump sum and the balance of your money is used to provide a level of income for the next 5 years or more.
You have some control over the amount of income you select for the next 5 years. There is a maximum amount that you are able to take. At the end of the term, you will have a fund amount. The more income you take, the smaller the fund amount.
You do not have to take any income if you do not want to. Once selected, you are committed to that level of income for the next 5 years.
There is no investment risk to this plan and you will not suffer the highs and lows of normal investments. Your income and your fund are secured in a similar way to a conventional annuity.
In 5 years time you can take your fund value and either buy another temporary annuity (up to age 75) or you can buy a conventional annuity.
The benefits in the event of your death are what have made this option so popular. You can elect to provide a 100% spouses pension, so your spouse gets both your income for the rest of the 5 years, and also the fund amount at the end of the 5 years, so they can buy themselves an annuity.
For a very small cost you can select value protection. This would make an immediate lump sum payment on your death, to anyone you like (including a spouse). They receive your purchase price, minus any income that has been paid from the pot.
Please feel free to contact us for more details and some specific quotes. We would be happy to talk you through the different options.