How is a fixed term annuity calculated?

The annual income is determined by the annuity rate offered by the provider, which depends on your age, pension pot size, term length, and current gilt yields. This calculator uses a simplified annuity rate to illustrate the calculation: Annual income ≈ Pot size × annuity rate. The rate varies widely by provider, always compare quotes from multiple providers.

What is the difference between a fixed term and a lifetime annuity?

A lifetime annuity pays a guaranteed income until you die, regardless of how long you live. A fixed term annuity pays for a set period only (e.g. 5 or 10 years). Fixed term annuities typically offer higher initial income for shorter terms, and you retain a residual pot (GMV) at the end. Lifetime annuities offer security against longevity risk: outliving your money.

Can I take 25% tax-free from my pension before buying a fixed term annuity?

Yes. The pension commencement lump sum (PCLS) (commonly called the 25% tax-free cash) can be taken before purchasing a fixed term annuity. The annuity is then bought with the remaining 75% of your pot. From April 2024, the maximum PCLS is £268,275 (lifetime allowance abolished). This calculator uses your full pot for illustration, adjust downward if you plan to take tax-free cash first.

What happens at the end of a fixed term annuity?

At the end of the term, you receive the guaranteed maturity value (GMV), a pre-agreed lump sum. You can use this to buy another annuity, enter drawdown, take it as a taxable lump sum, or combine options. Planning for the end of the term is important, as annuity rates and your health may have changed.

Are fixed term annuity payments taxable?

Yes. Payments from a fixed term annuity are treated as pension income and taxed through PAYE. After your 25% tax-free cash, all annuity income is subject to income tax at your marginal rate. The personal allowance (£12,570 in 2026/27) may shelter some or all of your income if your total income is low enough.

Updated 6 April 2026

Fixed Term Annuity Calculator · Free UK 2026

Estimate your guaranteed annual and monthly income from a fixed term annuity, based on your pension pot, annuity rate, and chosen term.

✓ Free to use✓ Annual & monthly income✓ Total income projection✓ Instant results

Fixed Term Annuity Calculator

Enter pot size, annuity rate, and term. Income appears instantly

Pension pot (£)

Annuity rate (%)

Term (years)

Annual income

£5,000.00

£416.67/month for 10 years

Pension pot

£100,000.00

Annuity rate

5% p.a.

Annual income

£5,000.00

Monthly income

£416.67

Term

10 years

Total income over term

£50,000.00

Annuity rates vary by provider, age, health, and gilt yields. This calculator is illustrative only, not financial advice. Always compare quotes from multiple providers.

How Fixed Term Annuities Work

Quick Answer: A fixed term annuity converts your pension pot into a guaranteed income for a set period (1–25 years). At the end of the term you receive a maturity lump sum. Annual income ≈ Pot size × annuity rate. A £100,000 pot at a 5% annuity rate generates £5,000/year (£417/month).

What is a Fixed Term Annuity?

A fixed term annuity provides a guaranteed income for a specific period, typically 1 to 25 years. Unlike a lifetime annuity, payments stop at the end of the term, and you receive a pre-agreed maturity value (guaranteed maturity value, or GMV). It bridges the gap between early retirement and taking State Pension, or gives certainty while keeping future flexibility.

Formula

Annual income = Pension pot × annuity rate (%)

e.g. £100,000 × 5% = £5,000/year (£417/month) for the chosen term

Worked Example, £100,000 pot, 5% rate, 10-year term

Pension pot£100,000

Annuity rate5% p.a.

Annual income£5,000

Monthly income£417

Term10 years

Total income over term£50,000

Annuity rates vary by provider, age, and gilt yields. Always compare quotes. Income is taxable as pension income.

Frequently Asked Questions

A fixed term annuity (also called a temporary or short-term annuity) provides a guaranteed income for a set period, typically 1 to 25 years. Unlike a lifetime annuity, it does not pay for life. At the end of the term, you receive a maturity amount (the "guaranteed maturity value" or GMV) which you can use to buy another annuity, go into drawdown, or take as cash. It is ideal for retirees who want certainty for a defined period but not necessarily for life.