Site Index
Annuity RatesWhether you’re fit and healthy, suffering from poor health, overweight or a smoker, we’ll find you a higher annuity income for your retirement.
Annuity OptionsYou can add various options to your annuity to tie in with your personal circumstances. Click here for details of the options that might apply to you.
Annuity TypesIt’s important that you select the right type of annuity for your requirements. Click here for details of the various annuities available.
Short Term Annuity
This type of annuity is quite different from other annuity types. With a short term annuity you pay over part of your pension fund and in return the insurance company (the annuity provider) pays you an income for a fixed period of no more than 5 years. The annuity payments must cease before your 75 th birthday.
How a short term annuity works
The maximum income level
The maximum amount that can be taken as income is calculated by taking a rate from tables drawn up by the Government Actuaries Department (GAD) and applying it to that part of your pension fund that is not invested in life annuities.
This maximum amount must be recalculated every five years. The annuity income can be level or it can be arranged to increase each year at a fixed rate of typically 3% or 5%, or in line with the Retail Price Index (RPI); see inflation proof annuity.
Who might want a short term annuity
This type of annuity may be attractive to somebody wishing to defer buying a lifetime annuity, as short-term annuities are really intended for those people who do not want to commit their pension funds to buying a lifetime annuity because they believe the annuity rates on offer may get better in the future.
By using a short-term annuity, the decision on buying a lifetime annuity can be deferred. However, the decision cannot be deferred beyond the age of 75. Only part of your pension fund would be used in this way. The balance would be applied to an income drawdown arrangement.