Guaranteed Annuity Rates
A ' guaranteed annuity rate', is a contractual right, written into a private pension when originally taken out, to convert your pension fund into an annuity at a set, pre-determined rate, which will be detailed in the original pension policy document.
It is usually on a sliding scale, increasing with age, however, some policies only offer a guaranteed rate at a particular point, so you should check your policy carefully well before retirement to make sure you do not miss such a date.
A guaranteed annuity rate is only rarely available under a personal pension plan, but is more commonly found in what is known as a 'retirement annuity pension'; sold up until 1 July 1988.
As the annuity rate is guaranteed, it is not reliant upon prevailing annuity rates in the market at the time you take an annuity. The pension provider simply has to make the money up out of its own resources.
There may be other conditions written into the policy's guaranteed annuity rate option, for example, it might only be available if you take an annual annuity and may be only available on a level basis.
The golden rule is to check the policy well in advance and to confirm your options with the pension provider.
