Fixed term annuities are shaping up to be the “unsung hero” of the retirement income world, according to Canada Life.
An illustration by the pensions specialist found that £100,000 invested over a 10-year term would generate a guaranteed income of £5,000 a year in that period, with a guaranteed maturity value at the end of the term of £98,498.
Nick Flynn, retirement income director at Canada Life, said: “Fixed term annuities really are the unsung hero of the retirement income world. With rates where they are today, in our example a client could effectively guarantee a 5% return on their investment, and a return of almost all of their original capital at the end of the 10-year term.
“Fixed term annuities can suit all types of clients seeking a regular income with certainty at the end of the term. With rates moving so positively in a relatively short space of time, they deserve a second look.”
When choosing a fixed term annuity, clients can choose an income over any period of between 1 and 20 years. At the end of the term, clients can choose to invest in another fixed term annuity, a lifetime annuity, flexi access drawdown or withdraw the fund value.
Canada Life said they provide security, offering clients an income ‘bridge’ between retirement and state pension age and can work well for clients who do not want to lock into a lifetime annuity but want security over income for the term of the plan while retaining flexibility over any future decision.
