UK Retirees Surge Toward Fixed-Term Annuities Amid Tax Changes

Financial firms in the United Kingdom are seeing a surge in demand for fixed-term annuities, which provide guaranteed income for a set period—usually five to ten years—before a final lump sum payment. This trend is driven by retirees seeking to bridge the financial gap between their retirement date and the state pension age, which is increasing from 66 toward 67 by April 2028.

Canada Life Assurance Company and Standard Life report significant growth in these products. The shift is further accelerated by higher annuity rates and tax reforms introduced by Chancellor Rachel Reeves in the 2024 autumn budget. Specifically, the removal of the inheritance tax exemption for money left in defined contribution pensions, effective April 2027, is prompting retirees to reconsider their savings strategies.

Despite the growth, Legal & General reports that many UK adults aged 50 and over still hold misconceptions about how annuities function. Canada Life representative Nick Flynn noted that customers use these products to stabilize income in early retirement or fund specific commitments like school fees and mortgage payments.