Guaranteed Annuity Rates (GARs) Explained

What are Guaranteed Annuity Rates?

Pensions with ‘safeguarded benefits’ are not always final-salary or career-average defined benefit schemes. A UK pension plans can have one or several of a number of different kinds of safeguarded benefit.

A safeguarded pension benefit is simply a specialist inherent advantage to your existing pension arrangement which would be lost upon transfer. All safeguarded pensions with a value of over £30,000 needs a pension transfer specialist for advice before transfer.

How does a Guaranteed Annuity Rate work?

This means that at-retirement, your pension provider will offer you an annuity using a minimum rate. This minimum income ‘conversion’ rate would be lost if funds were transferred. A GAR is valuable as it is typically higher than any other annuity rate you could find on the open market.

Your GAR may be ‘promised’ only at normal retirement age. Sometimes the pensioner is limited to pre-defined spousal death benefits and/or inflation measures.

When looking at a pension statement with a Guaranteed Annuity Rate, focus upon:

  • the GAR calculation, and what that means for your pension income
  • how the income works, and whether it is inflation protected
  • whether the retirement age is limited in order to benefit from the GAR
  • any other GAR rules stated
  • what your pension is worth upon death

If you have a pension with a Guaranteed Annuity Rate, it is important you take FCA regulated advice from a pension transfer specialist. We can connect you to an FCA regulated pension transfer specialist, wherever you live.

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