Guaranteed Fixed Term Income Plan explained
A retirement income, without the need for lifetime commitment
Our Guaranteed Fixed Term Income Plan is a way to use money from your pension savings to get a regular income for a set period. It offers you the certainty of knowing how much your income would be for as long as the Plan lasts, without having to commit to this option for the rest of your life.
Key points:
- Our Guaranteed Fixed Term Income Plan is a way to receive a regular income from your pension savings over a set period chosen by you.
- You’ll always know how much regular income you’ll receive throughout the lifetime of the Plan.
- You can use some or all of your pension pot to set up this type of Plan, with the option of a guaranteed lump sum when the set period ends.
How does it work?
Our Plan works like an annuity, but with a fixed term. You use a lump sum from your pension saving to buy it, and in return, you receive a guaranteed amount of income for an agreed period of time. The amount, and the time period, are agreed from the start, so you know just where you stand.
How much you'll receive depends on factors including the options you've selected, such as whether you’ve chosen to take tax-free cash before buying the Plan.
You need to have a pension pot of £10,000 or more, after any tax-free cash and adviser charges, to buy this Plan.
You’ll have a choice of ways in which you can take the money the Plan provides:
- A regular income for a fixed period. This would normally be taken monthly, though you could choose to take your payments quarterly, half-yearly or yearly.
- A lower regular monthly income with a guaranteed lump sum at the end of the term.
- Or just the lump sum at the end — no income along the way
Aviva’s Guaranteed Fixed Term Income Plan is designed to help with your future planning, and bring you some certainty on how much income you’ll have throughout its term.
What are the pros and cons of the Guaranteed Fixed Term Income Plan?
Pros
- Guaranteed income for a fixed term – so there’s no ups and downs and no surprises, offering you greater certainty.
- You can choose how long you want our Plan to run for – from 3 to 25 years.
- There’s an inflation protection option. You have the option to increase the amount you take from your pension money in order to protect your guaranteed income from inflation. This is called escalation. You can choose to increase your income payments in fixed steps each year (up to a maximum of 8.5%) or by an amount equal to the retail prices index.
- Value protection – if you were to die during the term of your Plan, we’ll make a payment to your beneficiaries. This will be the purchase price you were due to receive plus minus any tax-free cash you’d taken, the adviser charge and any income payments paid up to the date of your death. You can choose to protect some or all of the value of your Plan, and you get to decide whether you want to do this for the whole term or just part of it.
- Help for your chosen beneficiaries - if you've selected a guaranteed period for your Plan, and die during that period, they can choose to receive a lump sum, carry on receiving income through a dependent’s Plan, or use the value to buy another retirement product.
- Opportunity to choose options at the end of the Plan's term - if your Plan has a guaranteed maturity value, you can take your lump sum, buy another fixed term Plan, or look into alternatives such as a lifetime annuity or drawdown.
Cons
- If your total income is more than your personal allowance, you’ll have to pay tax on the income from this type of Plan. It’s treated like regular earnings, and the guaranteed value at the end may also be taxable.
- Once you’ve set up your Plan, you won’t be able to change anything throughout its term. But if your circumstances change, you'll be able to exit early and cash in, provided you've chosen a guaranteed period equal to its full term.
- Once you’ve taken an income from your Plan any future pension contributions (including tax relief) above £10,000 per year will be subject to a tax charge. This effectively restricts you to only getting tax relief on contributions up to and including £10,000 per year.
- You can't transfer our Plan to any other during its term.
- There won’t be any investment growth, since your income and the maturity value of the Plan are fixed from the start. You also need to consider what the effect of inflation may be. Prices may go up, but your income will stay the same unless you’ve chosen our inflation protection option.
- Some options which you can choose to take – such as value protection or a guarantee period – will reduce the amount of regular income you’ll receive.
- You need to be aged 55 or more at the start of your Plan, and no older than 90 when the fixed term ends.
Please note that tax benefits depend on individual circumstances and may change in the future.
Is our Guaranteed Fixed Term Income Plan right for you?
Our Plan is designed for people who want the security of a fixed income for a specific period during their retirement, but don’t want to commit to this way of taking money from their retirement savings for life.
The Plan may be a good choice if you want to keep your retirement options open, but you do need to think carefully about your aims and your lifestyle, particularly during the years that you want the Plan to run – as well as your financial position afterwards.
If the amount of income you’ll receive fits in with what you have in mind, and you’re happy that your needs aren’t likely to change during the period you’ve chosen, then our Plan may be right for you. We’d always recommend that you shop around before making your decision.
Advice on your retirement options
The Aviva Guaranteed Fixed Term Income Plan is only available through professional advisers, who can give advice based on your own individual circumstances.
You can find a local independent adviser by visiting Unbiased.co.uk.
You could also choose an adviser from the Aviva Financial Advice Team. You can get our expert, personalised advice if you have £300,000 or more in total across all your pension and investment savings.
How do you open a Guaranteed Fixed Term Income Plan?
You can’t buy this Plan directly from Aviva. This is because everyone’s circumstances are different, and it’s important to make sure that you’re buying a product that would work for you as an individual. A financial adviser is best placed to help you with this. They’ll give you advice that’s tailored to your needs – including your tax position – and help you buy one of our Plans if you decide to do so.
If you don’t already have a financial adviser, you can follow the links above to find out more. Remember that an adviser will charge you for advice.
Some alternative annuity options to consider
If you think that an Fixed Income Plan may be the right choice for you, you might also want to look at some other types of annuity – including the option to take out a lifetime annuity, if leaving your retirements options open isn’t a priority for you.
Lifetime annuity
Enhanced annuity
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