Who wouldn’t want a risk-free income in retirement, that you are guaranteed to receive every month regardless of what turbulence hits the economy and stock market.

It’s no wonder, then, that annuities have seen a resurgence. These are products where you use some or all of your pension savings to buy an income for life.

Despite their appeal, many retirees still shy away from annuities because they are a huge commitment – once you’ve locked in to one you can’t change your mind and with some annuities your income dies with you so you may not get good value if you don’t live as long as expected.

However, the little-known option of a fixed-term annuity – which lasts for five or ten years – could provide a middle ground. Plus, it could potentially net you a guaranteed rate of 7.5 per cent, with most of your money back in five years.

A retiree buying a top-rate five-year fixed term annuity with £100,000 could get an annual income of £7,510 and £85,561 back at maturity, according to pension website the Annuity Project.

Alternatively, you could buy one that pays £5,050 a year for five years – and pays you back your full £100,000 at maturity.

Despite their appeal, many retirees still shy away from annuities because they are a huge commitment – once you’ve locked in to one you can’t change your mind

This is well ahead of the ‘4 per cent rule’, which is the amount pension investors are often told they can safely afford to draw from their pot each year, to ensure they don’t run out of cash in retirement.

It also beats the rate on the best five-year fixed rate savings bonds on the market, with current best buy, Close Brothers, paying 4.92 per cent.

‘It’s a good halfway house between an annuity for life and income drawdown which is more volatile,’ says Billy Burrows, founder of the Annuity Project and a financial adviser at Eadon & Co.

He adds that you can opt to take no income and instead go for the maximum maturity value. With this strategy, you could annuitise £100,000 and get a guaranteed £128,641 back five years later.

‘This strategy can help retirees who don’t need the income, but don’t want to leave large sums in the stock market where its value could fall,’ he says.

In contrast with a lifetime annuity, a fixed-term annuity typically pays a guaranteed income for a set period, usually five to 10 years.

At the end of the term, you’ll get a lump sum back – referred to as a guaranteed maturity amount or value – giving you the freedom to decide what to do next.

You choose the term and level of income you receive – the more you take, the lower the final payout.

Adam Vanstone, a chartered financial planner at adviser Chester Rose, says: ‘That maturity amount is then yours to use as you wish: another fixed-term annuity, drawdown, a lifetime annuity or cash.’

If you die before the end of a fixed-term annuity, your beneficiaries get the remaining funds – either with ongoing payments followed by the agreed final payment or as a lump sum.

There are scenarios where advisers say a fixed-term annuity can be particularly helpful.

Louise Bowman, a chartered financial planner at Shackleton Advisers, says: ‘It may be used by someone who has recently retired and needs a reliable income until other retirement benefits, such as a pension or state pension, begin to pay out.’

Vanstone says the impending inheritance tax changes have increased the appeal of annuities. From April 2027 pensions will become subject to inheritance tax.

Fixed-term annuities create a way for people to get their retirement savings out of HMRC’s reach. You can spend the income or give it away.

Gifts made in this way can fall outside the inheritance tax net immediately if you make them regularly and they don’t affect your living standard.

A retiree in rude health may also choose a fixed-term annuity now and buy a lifetime annuity later, when their health might have deteriorated, making them eligible for a higher income.

But fixed-term annuities are not a golden bullet. If you opt to take a high income, you will get back less than the lump sum you put in.

Burrows warns that plans to take out a fixed-term annuity and then buy another one at the end of the term may come a cropper if rates have fallen significantly by then.

And while a fixed-term annuity is more flexible than a lifetime one, it’s still less adaptable than drawdown. You won’t, for example, be able to flex your income to control your tax bill or adapt to changes in your spending.