Guaranteed Annuity Rates

A Guaranteed Annuity Rate (GAR) is a type of annuity that offers a guaranteed income from your pension at retirement. Guaranteed Annuity Rates are associated with many older-style pension schemes. They offer a guaranteed minimum level of income, but often only on or after a certain age.

Keep reading to find out everything you need to know about GARs, including how they work and whether or not you can transfer your GAR pension.

Table of Contents:

What Are Guaranteed Annuity Rates?

As people approach retirement, they often face a number of important decisions regarding their financial future. There are many questions to ask and research to be done before deciding what to do with a pension.

Some people only discover they have a GAR on a pension when it’s time to make a decision. A Guaranteed Annuity Rate is a ‘fixed-in’ rate which was determined when the pension was set up. It’s essentially a guarantee to pay a certain rate of income on a pension pot.

This can provide retirees with a sense of security, knowing that they will have a fixed annuity rate no matter what annuity market conditions are like when they take an income.

They were created at a time when no one could have forecast that annuity rates would continue to slide for decades. At the time, they were seen as more of a hedge, much like fixed-rate mortgages, against lower future annuity rates.

Key Takeaway: GARs offer a fixed income stream for life, often at a higher rate than available in the market.

How Do They Work?

When you’re nearing retirement, you’ll likely start to think about how to best preserve your hard-earned savings. When looking at your pension, you find out you have a GAR with a rate of 8%, so what does this mean?

Well, if you have £100,000 in your pension, your GAR will guarantee an annual income of £8,000 (8% of £100,000).

GARs can have rates ranging from 3% to 15%, but you’ll need to check the individual policy terms to understand the rate being applied to your pension.

The reason GARs are quite highly thought of is that they offer a rate typically higher than you can get in the open annuity market.

Standard market annuity rates have continued to slide due to advances in medical care, resulting in us living ever longer as a nation. The increasing age of death means annuity providers have to pay the guaranteed lifetime income for longer, therefore having to offer lower rates of income at the outset. GARs are unaffected by the standard annuity market rates as their rate has been fixed from the beginning of the plan.

GARs were created when the average life expectancy was about 10 years shorter than it is today.

Key Takeaway: A GAR provides an income for life, but can’t be cashed in once started, or passed on after death as a lump sum.

How Do I Know If I Have a Guaranteed Annuity Rate?

To find out if you have a guaranteed annuity rate, check your pension statement or contact your pension provider. If you don’t have a guaranteed annuity rate, your pension provider will use a variable annuity rate to calculate your pension benefits.

The guaranteed annuity rate is important because it affects how much income you’ll receive from your pension. A higher guaranteed annuity rate means a higher income and a lower guaranteed annuity rate means a lower income.

If you’re approaching retirement, it’s important to know what your guaranteed annuity rate is so that you can make informed decisions about whether this is a suitable way of taking pension income.

Can I Transfer My Guaranteed Annuity Rate Pension?

As you approach retirement, you’ll need to understand what options you have with your pension.

Taking a pension with a GAR is often the most appropriate option, but everyone has different circumstances and income needs in retirement.

These are the main options available to you:

  1. Take the Guaranteed Annuity Rates by completing your pension paperwork. You’ll mostly have the option to take up to 25% tax-free cash also. Taking tax-free cash will lower the income being offered.
  2. Transfer your GAR into a Pension Drawdown arrangement where your money stays invested and offers the flexibility to take as and when needed.
  3. If you have a medical history which might shorten your life expectancy, but still want a guaranteed lifetime income, you could buy an enhanced annuity in the open market. This might provide a better rate than your GAR pension, depending on the seriousness of your health.

As GARs are described as pensions with safeguarded benefits, you will need to take financial advice from a Pension Transfer Specialist if you want to exercise options 2 or 3 above.

A financial advisor can help you understand the pros and cons of your GAR and help you choose the right option for your individual needs.

Key Takeaway: You can transfer your GAR to Pension Drawdown or an enhanced annuity if a financial adviser detemins this to be the best option.

Make Sure You Don’t Miss Out

When it comes to your retirement, don’t make the mistake of leaving the decision to the last minute.

Many GAR’s have predetermined dates that they have to be taken. This could be your 60th or 62nd birthday. If you don’t do anything or defer taking the pension on this date, you may miss out on the Guaranteed Annuity Rate.

Call your pension scheme and ask them to send you a pension statement. Ask them if your pension has any guarantees attached to it and what these are.

Planning your retirement should be a decision taken over many months if not years; don’t be caught out by having to make a decision quickly if you’re near to your GAR maturity date.

Key Takeaway: Leaving your pension as is could mean missing out on the guaranteed annuity rate.

Pros and Cons of Guaranteed Annuity Rates

While GARs can offer some attractive benefits, there are also some potential drawbacks to consider before investing.


  • Guaranteed Income For Life:

One of the biggest advantages of a GAR is that it provides you with a guaranteed income stream for life. This can be extremely helpful in retirement planning, as it gives you peace of mind knowing that you will not outlive your savings.

  • Potentially Higher Interest Rates:

Another benefit of GARs is that they often offer higher interest rates than standard market annuities, which means more money back in your pocket over time.


  • Lose Control over Funds:

One downside to GARs is that once you take your pension income, there is no cash in value. You hand your pension pot over to the annuity provider at the start and, therefore, can’t cash it in or pass any remaining lump sum on after death.

  • Limited Options:

Another thing to keep in mind is that GARs typically have fewer choices of options than if you were to buy a standard annuity. Some GARs don’t offer a spousal benefit, most don’t offer inflation protection, and some don’t offer the option to choose how frequently you want your pension paid.

Key Takeaway: GAR’s don’t offer the option to pass any unused fund on as a lump sum after death.


If you’re approaching retirement and have a Guaranteed Annuity Rate Pension, it’s important to understand your options.

Guaranteed Annuity Rates offer a guaranteed income from your pension at retirement, but sometimes, you could get a better rate on the open market.

Be sure to weigh the pros and cons of GARs before making any decisions about your pension.

If you’re looking for advice on your GAR, then contact a Pension Transfer Specialist today. They can offer you expert advice and guidance on this complex topic to help ensure that you make the best decisions for your future retirement.