What are Guaranteed Annuities Rates?

Guaranteed Annuity Rates, Or GARs, are like a conventional annuity that offer a lifetime income in exchange for a pension fund, however the rates that GARs have are usually much better than market rates and are only attached to certain pensions.

Pensions with GARs are usually from older contracts, typically during the 1980s/1990s when annuity rates were higher than they are now.

These are rates that were written into the contract, when it was set up, so they can never be changed. 

 You would have an invested fund, like a typical “defined contribution” pension, but the provider would guaranteed these promised rates. Historically, normal annuity rates, may have been better than the guaranteed annuity rates offered by the provider. 

However, as recent standard annuity rates have fallen, GARs, at least now, look very attractive. Despite the valuable guarantee these contracts have, they are not without their problems. 

Common pension providers that have offered GARs in the past include:

  • Royal London
  • ReAssure
  • Prudential
  • AEGON
  • Sun Life Financial of Canada
 

Are Guaranteed Annuity Rates worth it?

However, while they do certainly have advantages, there are some potential downsides.

One of the main downsides is the fact that they are too restrictive. In order to qualify for the GARs, you may have to have a specific type of annuity. For example, this could be a single life, level basis with only a 5 year guarantee period. 

What this means is the annuity would only be paid to one person, would not increase once it is being paid and if you were to die after 5 years, it would stop being paid. 

GARs might not offer any protection for a spouse or your loved ones. You may want the ability to pass on your fund to your spouse or children. With a guaranteed annuity, this is not always possible. You may also not want inflation protection which can be a feature of these contracts too. You may wish to give up the inflationary increase, and opt for a higher income that remains level. 

Fortunately you can transfer GARs and choose a pension that may be more suited to your retirement goals. 

If you have a pension with GARs, and want to talk it through with a UK Qualified Financial Adviser, contact us today on 01793 686393. 

Transferring Guaranteed Annuity Rates

You do have the option to transfer your pension with GARs away and opt for flexible-access or a different type of annuity.

However to do this, under the current legislation, if your fund exceeds £30,000, you would require financial advice from a regulated adviser. We are authorised to provide this advice, and have experience in doing so. 

If you are in ill health, a pension with GARs may not be most suited to you. Depending on your circumstances, you may wish to have the pension as a larger fund, or taken out as one lump sum. 

Alternatively, you may qualify for a medically enhanced annuity which is an annuity that takes into account certain medical issues. 

By transferring to flexi-access drawdown you could take money from your pension pot as and when you please, rather than having a restrictive income that may be offered by the GARs. 

If you have a pension with GARs and want advice, or have any questions, or just want to have a chat about it with a UK Qualified Independent Financial Adviser, then phone now on 01793 686393 or contact us online.