A fixed term annuity is a type of pension product that offers an alternative to the usual method of obtaining an income during your retirement. It’s actually a more flexible option, which is ideal for those people who are looking to keep their options open, because they think that their personal circumstances could change further into their retirement. If you think you might need more money as your health deteriorates, you could be stuck with a fixed income for the rest of your life with other annuities.
The concept is quite simple; you invest a sum from your pension scheme, and then the provider pays you a guaranteed income for a set amount of time, which is generally five or more years. It’s important to note that the government does impose limits on the amount that a pension scheme can pay out per month, though you are generally able to choose what you’d like to be paid within those limits. There may also be benefits to take, should you not live out the full term. If you do reach the end of the agreement, you are eligible to receive a lump sum. Many people choose to reinvest this in a future plan.
It is important to be aware that not all plans are the same. For example, some policies offer the chance for you to convert to an enhanced annuity if your health deteriorates during the term of the annuity, but this is not always the case. If you didn’t have the benefit, you’d have to wait until the scheme had ended to choose a new income product. For this reason, you should always seek advice before buying any product, and you should make sure that you fully understand all of the details.
To conclude, fixed term annuities are a product that will be ideal fro some people, but are not suitable for others. If you want to ensure that your options are open, and don’t want to have to worry about investment performance, then a fixed term annuity could be a very good decision. If however, you want a guaranteed income for the rest of your life, and would prefer not to have to think about buying a pension product in the future, then you may want to look into traditional annuities. You can visit www.nononsenseannuities.co.uk for more information on different types of annuities.