A lifetime annuity, bought from an insurance company, pays you a guaranteed income for the rest of your life. Your age and health will affect the amount you receive; the older you are, and the poorer your health, the higher your annuity income will be. This is because your life expectancy is less than that of a younger and / or healthier person.
A fixed-term annuity will pay you an income for a fixed period of time – up to 40 years, but typically five or ten years. The money you pay for your annuity is invested, and at the end of the term you receive a lump sum. This will be the amount you paid for the annuity, plus investment growth, minus charges and the amount you’ve already received in annual payments. This sum can be used to buy another annuity or can be moved into a pension drawdown scheme.