Guaranteed Annuity

Many former pension plans come with guaranteed annuity rates. These must be carefully studied. Over the years, the rules on safeguards may change and you must ensure that the guaranteed rate is good for you.

For example, certain guaranteed annuity rates apply only to the person who took the pension plan, no benefits would be payable to a spouse. If you bought a guaranteed annuity rates it may be that you get a very good rate of return, but if you died after a short period of time, say just a couple of years and your spouse does not receive any additional income.

Value Fund £ 50,000
Example income £ 5,000

So if you died after 2 years of payments you have received £ 10,000 and the annuity provider keeps the £ 40,000.

Say you buy a free market rate, which pay £ 3,000 a year, but also pay £ 3,000 to your spouse, a year after your death. In this example, your spouse should have lived another 2 years to be better off. Thus, after 4 years together you would have received more income.

You need to investigate the conditions of the warranty and make sure they receive your own situation. No one knows how long they will live when they buy an annuity, but taking into account your health status is an important decision, even when guarantees are offered.

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