Guaranteed Annuity Rates
Guaranteed annuity rates (GAR) were sometimes offered with pensions taken our prior to 1988. These type of pension policies guarantee the minimum income that a pension provider must offer as annuity when you retire. So they guarantees the minimum income you will receive in your retirement. Sometimes these guaranteed annuity rates are as high as 10% – 12%, which is much higher than annuity rates available at the moment. Someone who has a pension policy with a guaranteed annuity rate could double their income in retirement compared to the standard rates available in today’s market. If however you reached retirement and your guaranteed annuity rate was lower than the market rate you also have the option of choosing an alternative annuity provider to get the more favourable rate.
There may be conditions that apply to the guarantee, some only allow you to take your annuity at a certain age (e.g. 65), they may not provide the flexibility of any spouses benefit or indexation, and some may have a date the guarantee ends at which you may revert to the providers standard rate.
So it is important to study the small print of your pension policy if you have an older pension plan to understand if you may qualify for a guaranteed annuity rate and if it compares well with current annuity rates. Your pension provider will not necessarily point out that you have a guaranteed annuity rate so it is important that you seek advice to be certain where you stand.
Contact us and we will make sure you get the independent annuity advice you need.