A short term annuity, also known as a temporary annuity can be defined as an agreement between you and your pension provider of your choice under which you hand over part of your pension pot in return for a fixed income from. The maximum period is five years and the payment must stop before you reach the age of 75.
The absolute maximum level of payout is worked out by by taking a rate from tables drawn up by the Government Actuaries Department and then applying it to the part of your pension that is not tied up in life annuities. This maximum level must be recalculated every five years. A short term annuity can be either a level annuity or it can be an escalating annuity or RPI linked annuity.
This kind of annuity may suit someone who does not wish to immediately purchase a life annuity.