Surge in demand for short term annuity alternatives

Retirement specialist Canada Life has reported a surge in sales of its Fixed Term Income Plan (FTIP) – a shorter term income generating alternative to a lifetime annuity which mostly avoids capital erosion.

The firm has seen a 123% rise in H1 2026 sales of its FTIP compared to the same period in 2025, it says.

Canada Life says the increase suggests many clients are opting for a shorter term approach to income generation during the current uncertainty.

The company said: “For retirees who may not be ready to commit to a lifetime annuity just yet, or don’t want to take investment risk in drawdown, FTIPs are emerging as a popular alternative. They provide the same income security as an annuity but for a shorter, set period – with the added benefit of an optional lump sum paid at the end of the term (known as the Guaranteed Maturity Value).”

Canada Life says £100,000 invested over a 10-year term could provide a guaranteed income of £5,417 a year and still return the full £100,000 at the end of the term. The income would, however, be lower than a standard annuity.

Nick Flynn, retirement income director at Canada Life, said: “As the cost of government borrowing has risen along with interest rates, annuity rates have hit record highs in recent years. Fixed Term Income Plans (FTIPs) have benefitted from this same rate environment and are gaining popularity as retirees look for increasingly flexible ways to manage their pension income.

“FTIPs are resonating with retirees because they solve real challenges, helping retirees ‘buy time’ before committing to drawdown or purchasing a lifetime annuity. Customers are choosing the product to bridge the gap to State Pension or defined benefit pension start dates, help fund specific commitments such as mortgage payments or school fees, or stabilise income in the earlier years of retirement.”

He added that Fixed Term plans were not right for everyone and rates can vary significantly between providers.