A short term annuity is an arrangement made between you and an insurance company of your choice under which you pay over part of your fund and in return the insurance company pays you an income for a fixed period of no more than 5 years.
The maximum amount that can be paid is calculated by taking a rate from tables drawn up by the Government Actuaries Department and applying it to that part of your fund that is not invested in life annuities.
This maximum amount must be recalculated every three years. The annuity can be level or it can be arranged to increase each year at a fixed rate or in line with the Retail Price Index.
This type of annuity may be attractive to someone who wishes to defer buying a lifetime annuity.
Find out whether or not a Short Term Annuity will be suitable for you by talking to an adviser.