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Phillip and Sue’s Case Study- Fixed Term Annuity

Phillip is 65, lives with his spouse Sue who is also 65, and has £100,000 in his pension fund to buy an annuity. He’d like to compare Option B with Option C. A Lifetime Annuity – our Option B – would be fixed for the rest of his life, based on his personal circumstances today. Let’s see what would happen if those changed … and how a Fixed Term Annuity might be better for him.*

Lifetime Annuity5-year Fixed Term Annuity
£3,309 per year for whole of life with 100% spouse protection so his wife Sue can receive his annuity if he dies.£5,962 per year for 5 years, leading to a £48,446 GMA (Guaranteed Maturity Amount) to choose a different option, perhaps a Lifetime Annuity.

After five years with Option C, Philip can reassess his choices.

Phillip & Sue are both alive and healthyPhillip has been diagnosed with Type 2 DiabetesSue has passed away
With his GMA, he chooses a Lifetime Annuity. The annual income from £48,446 would be £2,113 for life with 100% spouse protection.His annual annuity for life would rise to £2,184 per annum still covering Sue with 100% spouse protection.If Sue was to die and Phillip chose to have no other death benefit, Phillip receives £2,157 per annum, and the payments die with him. **

*Based on a fund of £100k and taking the 25% Tax Free Cash of £25,000, with 100% value protection over a 5 year fixed term, taking tax free cash, with death benefits as noted. Source: MyPensionExpert, 21/03/2017.
** Death benefits would be dependant on provider.