Canada Life has highlighted fixed-term income plans as an alternative to lifetime annuities if a client is looking for income security but for a shorter period.

Lifetime annuities have increased in popularity off the back of recent high rates.

Fixed term income plans offer a guaranteed regular retirement income for a set period – between one and 20 years – with a guaranteed maturity value, if selected, alongside death benefits.

Although these plans are written under drawdown legislation, they have also benefited from the same significant improvement in rates as lifetime annuities.

Retirement income director at Canada Life, Nick Flynn, suggested that fixed term income plans offer a “third way” for clients seeking income security but not looking to lock into a lifetime annuity now.

“While we continue to face economic headwinds and the uncertain future for generating reliable retirement incomes off the back of drawdown portfolios, these plans have a role to play in delivering the certainty clients seek,” said Flynn.

“While annuity rates have come off the highs we experienced after the mini-Budget, they are still up 43% from the start of last year, and fixed term income plans have also benefited and now offer significantly better returns with the certainty of guaranteed maturity values. They should be part of any consideration around retirement income plans.”

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