Guaranteed Periods and Annuities
If 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 £5,000 per year. If you died after two years, it would continue to pay out £5,000 per year, for a further eight years.
The cost (the reduction in initial income) of building in a guarantee varies depending on your age, gender and whether or not you combine it with a spouse's pension.
If you're 55 for example, when you buy your annuity and you're in good health 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 55 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 crunchers/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 of death. Click here to find out more about value protected annuities.
If you can't find the information you're looking for on the website, or you want to know more or have a question, or just want to chat through some details about your pension then please feel free to contact us, without obligation. Either contact us online or call 0800 011 2713.