What is a guaranteed annuity option?

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Some policies have a potentially valuable guaranteed annuity option (GAO) sometimes called a safeguarded benefit or safeguarded–flexible benefit. If you have this benefit, it means your policy or scheme will guarantee to offer you a particular annuity rate. These rates were guaranteed when the policy or scheme was taken out, and may be better than the rates available to you on the open market.

The guarantee relates to the terms on which we convert your pension savings into an annuity using a guaranteed annuity rate (GAR). If you choose it, this option will provide a secure rate of income in retirement. 

You’ll lose your right to the guarantee if you:

  • transfer to another pension provider;
  • transfer to one of our platform products;
  • take tax-free cash;
  • take the full fund as a small pot or serious ill health lump sum;
  • take an open market option; or
  • take an annuity before age 60 (in some circumstances).

If you take a tax-free cash lump sum you will lose the GAO on that portion of the fund only.

The guarantee doesn’t apply to any benefits payable on your death before retirement. 

Aegon don't sell annuities however we’ve partnered with Legal & General to honour any guaranteed annuity rate (GAR) you’re entitled to. You can contact Legal & General on 0800 009 3867 or email at retire@landg.com. As it's not a secure method of communication, please don't email any personal, financial or banking information.

Remember, it’s important to shop around if you choose an annuity as you may get a higher retirement income with another provider. This is because different providers offer different rates and types of annuity products. If you do this you’ll lose your guarantees with Aegon. 

You can find your policy/scheme type on the covering letter under policy class, or on the policy schedule/booklet that was issued when the policy started. If you're not sure of the type of policy you have, please contact us on 03456 100 010 and we'll confirm this for you. For more information on your GAO, look at the appropriate section for your policy below.

This type of policy may also be called a Retirement annuity contract. The guaranteed annuity option can be taken at any age between 60 and 75, or if you’ve reached your protected pension age or meet the conditions to take benefits early under the ill-health rules. If you choose this option it will provide an annuity only on the following basis in line with your policy conditions:

  • on a single life basis only (so without any surviving spouse’s/registered civil partner’s benefit);
  • that’s payable yearly in arrears;
  • that doesn’t increase in payment; and  
  • that doesn’t include any guarantee that annuity payments will continue for a period after your death. 

You can’t use the GAO to buy a spouse’s or joint life pension.

An example of the standard guaranteed annuity option payable on an annual basis, in arrears with no guaranteed period is shown below:

Reflex
Sex Age Fund value GAR Yearly annuity payable
Male 65 £50,000.00 10.8% £5,400.00
Female 65 £50,000.00 9.1% £4,550.00

This means:

  • If you’re a male and you want to take your pension at age 65.
  • The table shows an annuity rate of £108 per £1,000 of fund.
  • So if your fund is worth £50,000, your pension will be £50,000/£1,000 x £108 = £5,400 a year.

This type of policy may also be called a Retirement annuity contract. The guaranteed annuity option can be taken at any age between 60 and 75, or if you’ve reached your protected pension age or meet the conditions to take benefits early under the ill-health rules. If you choose this option it will provide an annuity on the following basis in line with your policy conditions:

  • on a single life basis (so without any surviving spouse’s/registered civil partner’s benefit);
  • that is payable monthly in advance;
  • that doesn’t increase in payment; and  
  • that doesn’t include any guarantee that annuity payments will continue for a period after your death.

You can’t use the GAO to buy a spouse’s or joint life pension.

An example of the standard guaranteed annuity option payable on a monthly basis, in advance with no guaranteed period is shown below:

Raw
Sex Age Fund value GAR Yearly annuity payable
Male 65 £50,000.00 10.2% £5,100.00
Female 65 £50,000.00 8.7% £4,350.00

This means:

  • If you’re a male and you want to take your pension at age 65.
  • The table shows an annuity rate of £102 per £1,000 of fund.
  • So if your fund is worth £50,000, your pension will be £50,000/£1,000 x £102 = £5,100 a year.

The guaranteed annuity option can be taken at any age between 55 and 75, or if you’ve reached your protected pension age or meet the conditions to take benefits early under the ill-health rules. If you choose this option it will provide an annuity on the following basis in line with your policy conditions:

  • on a single life basis (so without any surviving spouse’s/registered civil partner’s benefit);
  • that is payable monthly in advance;
  • that doesn’t increase in payment; and  
  • that has a guaranteed period of five years - this means that if you die before the end of the guaranteed period, the annuity will continue to be paid up until the end of the guaranteed period. The guaranteed period starts when you set up your annuity. 

You can also use the guaranteed annuity option to include the following options:

  • a surviving spouse’s pension payable on your death and/or 
  • the annuity to increase each year by a set amount. 

An example of the standard guaranteed annuity option payable on a monthly basis, in advance with a five year guaranteed period is shown below:

SEL/SEL DA
Sex Age Fund value GAR Yearly annuity payable
Male 65 £50,000.00 11.11% £5,555.00
Female 65 £50,000.00 10.2% £5,100.00

This means:

  • If you’re a male and you want to take your pension at age 65.
  • The table shows an annuity rate of £111.1 per £1,000 of fund.
  • So if your fund is worth £50,000, your pension will be £50,000/£1,000 x £111.1 = £5,550.00 a year.

The guaranteed annuity option can be taken at any age between 55 and 75, or if you’ve reached your protected pension age or meet the conditions to take benefits early under the ill-health rules. If you choose this option it will provide an annuity on the following basis in line with your policy conditions:

  • on a single life basis (so without any surviving spouse’s/registered civil partner’s benefit);
  • that is payable monthly in advance;
  • that doesn’t increase in payment; and  
  • that has a guaranteed period of five years - this means that if you die before the end of the guaranteed period, the annuity will continue to be paid up until the end of the guaranteed period. The guaranteed period starts when you set up your annuity. 

You can also use the guaranteed annuity option to include the following options:

  • a surviving spouse’s pension payable on your death and/or 
  • the annuity to increase each year by a set amount. 

An example of the standard guaranteed annuity option payable on a monthly basis, in advance with a five year guaranteed period is shown below:

EXSEL
Sex Age Fund value GAR Yearly annuity payable
Male 65 £50,000.00 10.0% £5,555.00
Female 65 £50,000.00 8.8% £4,400.00

This means:

  • If you’re a female and you want to take your pension at age 65.
  • The table shows an annuity rate of £88 per £1,000 of fund.
  • So if your fund is worth £50,000, your pension will be £50,000/£1,000 x £88 = £4,400 a year.

Please contact us on 03456 100 010 for a quote showing the guaranteed option available for your specific circumstances. 

The guaranteed annuity option can be taken at any age between 55 and 75, or if you’ve reached your protected pension age or meet the conditions to take benefits early under the ill-health rules. If you choose this option it will provide an annuity on the following basis in line with your policy conditions:

  • on a single life basis (so without any surviving spouse’s/registered civil partner’s benefit);
  • that is payable monthly in advance;
  • that doesn’t increase in payment; and  
  • that has a guaranteed period of five years - this means that if you die before the end of the guaranteed period, the annuity will continue to be paid up until the end of the guaranteed period. The guaranteed period starts when you set up your annuity. 

You can also use the guaranteed annuity option to include the following options:

  • the annuity to have a longer guaranteed benefit and/or
  • the annuity to increase each year by a set amount. 

You can’t use the GAO to buy a spouse’s or joint life pension.

An example of the standard guaranteed annuity option payable on a monthly basis, in advance with a five year guaranteed period is shown below:

SEBO
Sex Age Fund value GAR Yearly annuity payable
Male 65 £50,000.00 11.11% £5,555.00
Female 65 £50,000.00 10.2% £5,100.00

This means:

  • If you’re a male and you want to take your pension at age 65.
  • The table shows an annuity rate of £111.1 per £1,000 of fund.
  • So if your fund is worth £50,000, your pension will be £50,000/£1,000 x £111.1 = £5,555.00 a year.

 

Things to think about 

We understand that choosing the right retirement option for you can be daunting, and we strongly recommend you get guidance or advice to help with your decision.

Pension Wise is a free and impartial service offering guidance to help you understand your retirement options. This service is available online at pensionwise.gov.uk(Opens new window), by phone on 0800 138 3944 or face-to-face by appointment. This isn’t a financial advice service.

To find out if your plan offers a guaranteed annuity rate, please contact us or your financial adviser. If you don't have a financial adviser, you can find one in your area at unbiased.co.uk(Opens new window).

Any guarantees are based on the ability of the issuing insurance company – in this case Scottish Equitable plc - to pay them. If, for example, that company no longer existed, then the guarantees it provides could be affected.

If you need any further information on the guaranteed options available to you please contact us on 03456 100 010.