Guaranteed Periods and AnnuitiesIf you want to ensure that your annuity will offer some value for money in the event of your early death then it is possible to build in a guarantee period. This can be either a five year or ten year guarantee period. How it works: Supposing you opt for an annuity with a 10 year guarantee, and it paid £5000 per year. If you died after two years it would continue to pay out £5000 per year for a further eight years. The cost (the reduction in initial income) of building in a guarantee varies depending on your age, and gender, and whether or not you combine it with a spouse's pension. If you're 50 for example when you buy your annuity, and you're in good then the difference in a five year and ten year guarantee is likely to be very small. But if you're 75 and have problems with your health then the difference can be quite significant. It is based on the likelihood of the guarantee being paid. A 50 year old in good health is likely to live until their seventies, whereas a 75 year old with health problems has less chance of living to 85, than 80. These differences are calculated by actuaries - the number crunches/statisticians who determine rates in the insurance market. An alternative to a guarantee period is to opt for value protection also known as capital protected annuities, which provides a return of fund in the event. Click here to find out more about value protected annuities
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