Fixed Term Income Plans

Retirement income is no longer a simple choice between drawdown or a lifetime annuity. The most robust plans use guarantees as a toolkit: combining different types of annuities with drawdown, ISAs and GIAs to manage risk across each stage of retirement.

Fixed Term Income Plans (FTIPs) are a key part of that toolkit. They offer guaranteed income for a defined period, together with a known maturity value at the end of the term. This allows advisers to add certainty where it is most needed, whilst keeping options open for later decisions.

What is a Fixed Term Income Plan?

An FTIP is a flexible drawdown policy that offers the guarantee benefits of an annuity combined with the flexibility of a drawdown contract. It runs for a fixed period of time from 1 year up to 30 years (divisible by months). During that time it:

• Pays a guaranteed return, either as regular income, a guaranteed lump sum at the end of the term or a combination of the two.

At maturity, the client receives the agreed amount, which can be used to:

• Purchase another FTIP
• Move into a lifetime annuity
• Return funds to drawdown, ISAs, GIAs or cash
• Coordinate with other income, such as DB pensions or state pension

This structure makes FTIPs particularly useful where client needs are clear for a period, but less certain further out.

Where FTIPs fit in a modern retirement toolkit

Bridging gaps and life transitions

Many clients now ease into retirement rather than stopping work overnight. Others have income that starts at different times. FTIPs can be used to:

• Cover the years between stopping work and state pension age
• Bridge to the start of a DB pension or other deferred income
• Provide income whilst a spouse continues working part time

By matching an FTIP term to these milestones, advisers can secure the income needed without drawing heavily from invested assets during this transition.

Managing sequencing risk in early retirement

The early years of retirement are highly sensitive to market falls. If clients rely solely on drawdown and experience poor returns at the start, their plan may never fully recover. Using an FTIP to secure 5 to 10 years of essential spending can:

• Reduce the need to sell investments in unfavourable markets
• Give portfolios time to recover from short term volatility
• Provide clients with the confidence that their basics are covered, even if markets are unsettled

In practice, this can make it easier to maintain appropriate investment risk for the rest of the portfolio, rather than de‑risking at the worst possible moment.

Keeping future choices open

Unlike a full lifetime annuity, an FTIP is designed with a clear decision point at maturity. This aligns neatly with regular review processes and offers genuine flexibility.

At the end of the term, clients can revisit:

• Health and longevity expectations
• Market conditions and interest rates
• Tax position, wrappers and IHT considerations
• Client priorities around spending, gifting and legacy

Your client can then decide whether to lock in more guaranteed income, return to drawdown, or mix both.

Integrating FTIPs with lifetime annuities and drawdown

FTIPs work best when used alongside other tools, as part of a phased guarantee strategy. A simple framework is:

• Essentials for life: State pension, DB income and lifetime annuities to cover long term, non‑negotiable costs.
• Near term essentials and commitments: FTIPs to secure key income needs for the next 5 to 10 years, including bridging gaps and time‑bound expenses.
• Lifestyle and legacy: Drawdown, ISAs and GIAs for discretionary spending and longer term growth, supported by the stability of guaranteed income in the background.

This structure helps clients understand that guarantees are not an all‑or‑nothing decision. Instead, they can be introduced gradually, at the right time and in the right amount, to support their objectives.

Benefits for advisers and clients

For advisers, FTIPs provide:

• A practical way to demonstrate management of sequencing and longevity risks
• Additional levers to tailor income to specific phases of retirement
• Natural review points where the plan can be recalibrated as circumstances change

For clients, they offer:

• Predictable income over clearly defined periods
• Peace of mind that important near term costs are covered
• Confidence that future options remain open, rather than locked in on day one

Used as part of a wider annuity toolkit, Fixed Term Income Plans help turn retirement into a series of manageable stages, each with the right balance of certainty and flexibility.