Buying an annuity: How to shop around
Guaranteed annuity rates
If your pension scheme provides you with a guaranteed annuity rate, the amount of income you receive could be much higher.
Guaranteed annuity rate
If your pension scheme provides a guaranteed annuity rate (GAR), this could provide you with a higher level of annuity income by purchasing your annuity from your pension provider than you may be offered on the open market.
It is, however, important that you check the terms and conditions attached to the guaranteed annuity rate, and that the annuity provided is suitable for your circumstances.
You can find out whether your scheme offers a guaranteed annuity rate and the terms and conditions that may apply by looking at the information you were given when you joined the scheme, or by asking your pension provider. Most schemes that offer a guaranteed annuity rate were marketed in the 1980s and 1990s, when market annuity rates were higher.
Some of the things you should look for when deciding whether to take up the guaranteed annuity rate are:
- When can the rate be taken? Some pension schemes only offer the rate at the scheme’s selected retirement date, not if you draw retirement benefits before or after this;
- If you want to include a continuing income for a nominated dependant, such as a spouse, does the GAR still apply?
- Does the GAR apply if you want to include escalation, so that your income increases each year to offset the effects of inflation?
It’s always a good idea to compare the income available if you take up a GAR with the income available if you shop around, especially if you may be eligible for an impaired life or enhanced annuity before you make up your mind.
Where can I find out more?
If you need more information, please contact us. A pension specialist from our team will be happy to help with whatever pensions-related question you have. Our help is always free.