Although not as common as lifetime annuities, fixed term annuities deserve more than a cursory glance, according to Canada Life.
As lifetime annuity rates have improved significantly over the past 18 months, these changes have also benefitted fixed term products.
As an illustration, based on a quote1 produced by Canada Life, £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 comments:
“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.”
How do fixed term annuities work?
- Clients can choose a regular fixed income over any period of between 1 and 20 years
- Can opt to receive a guaranteed maturity value (set at outset) at the end of the term
- 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
- Fixed term annuities require pension savings of at least £10,000
Some reasons why a client would consider a fixed-term income plan
- Security, offering an income ‘bridge’ between retirement and state pension age
- Client is not keen on locking into a lifetime annuity at this point, but wants security over income for the term of the plan and flexibility over any future decision
- Client doesn’t qualify for enhanced lifetime annuity rates today (no health or lifestyle to declare) but thinks they may in the future
- Note that once the plan is set up any income and/or maturity value is set for the term of the plan and cannot be changed
ENDS
Enquiries:
Press enquiries should be directed to:
Elle McAtamney at Canada Life, elle.mcatamney@canadalife.co.uk
Notes to editors:
- Source: sample fixed term annuity quote produced by Canada Life on 28.09.2023, for a 63-year old with no adviser charge or commission included. Quote available upon request.
- More details on Canada Life’s fixed term products can be found here: https://www.canadalife.co.uk/retirement/fixed-term-income-plan/
About Canada Life:
Canada Life is part of a group of companies controlled by Great-West Lifeco Inc., a diversified financial services holding company headquartered in Winnipeg, Canada. Through its subsidiary companies, Lifeco has operations in Canada, the United States, and Europe. Great-West Lifeco and its insurance subsidiaries have received strong ratings from major rating agencies. Great-West Lifeco has over 38 million customers worldwide and £1.532trillion assets under administration (as at 31 December 2022).
Canada Life Limited began operations in the United Kingdom in 1903 and looks after the retirement, investment and protection needs of individuals and companies alike. As well as providing stability and security through its individual contracts, Canada Life Limited has grown to become the leading provider of competitively priced group insurance solutions. Canada Life acquired Retirement Advantage on 3rd January 2018 for an undisclosed sum. The acquisition added over 30,000 retirement income and equity release customers and more than £2 billion of assets under management including a £1.5 billion block of in-force annuities to Canada Life.
Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Canada Life International Limited and CLI Institutional Limited are Isle of Man registered companies authorised and regulated by the Isle of Man Financial Services Authority. Canada Life International Assurance Limited and Canada Life International Assurance (Ireland) DAC are authorised and regulated by the Central Bank of Ireland.