What is a Temporary Annuity?

What’s a Fixed-Term Annuity?

A temporary annuity is an annuity that only pays out for a fixed term. You’re correct in that most annuities pay out an income for life — these are known as lifetime annuities and are the most common type of annuity sold today.

However, you also have the option to buy a temporary annuity, where you only secure a pension for a shorter period. When this term has passed, or the person who purchased the annuity (known as the annuitant) dies, payment stops.

Temporary annuities tend to offer a higher annuity rate than lifetime annuities because they’re paid for less time. This means you won’t necessarily have to use your entire pension pot to buy a retirement income.

You may favour a fixed term annuity if:

• You require a pension income today but aren’t ready to commit to a lifetime annuity
• You want more time to consider your retirement options
• You feel that lifetime annuity rates might rise in the future
• You want to see if there are any future changes to the retirement market / legislation.

A short-term annuity may not be best for you if:

• You want a flexible retirement income or you want an income that lasts for the rest of your life
• You feel lifetime annuity rates could be worse in the future
• You want to invest your income for growth over a fixed period.