GAR Options

Coben

I have read some posts on this forum and understand the advice regarding GARs. Just considering the options provided for purchasing an annuity using a fund with GARs. I understand a lot depends on individual finances/circumstances but I have been quoted a rate of 8.8% (I think. i.e. 40k fund - £3,468 p/a) to purchase a joint life annuity, level, 100% spouse, guaranteed 10 years. I am 75 so OH (60)

Other options quoted by company are at a higher rate but not joint life. Due to ill health, I am not sure that is worth considering single life and do not really need Cash lump sum.



If I opt for guarantee period of 10 years, what normally happens after 10 years?



I contacted an IFA to review all the options provided but he quoted nearly £1k fee and lost interest when he realised that the pension pot/company would not pay commission.

It is a small pot compared to many but perhaps I should pay IFA to avoid getting too stressed out!

Thanks in advance for any advice.

dunstonh

I understand a lot depends on individual finances/circumstances but I have been quoted a rate of 8.8% (I think. i.e. 40k fund - £3,468 p/a) to purchase a joint life annuity, level, 100% spouse, guaranteed 10 years. I am 75 so OH (60)

May be worth getting a requote with zero year guarantee. As its 100% spouse, the guarantee period isn't really that important for most people.

If the GAR is based on a starting point of single life, level, with 5 year guarantee, then amendments around that will increase/decrease the annuity rate.

If I opt for guarantee period of 10 years, what normally happens after 10 years?

If you are both alive, then it carries on until both of you are dead.

I contacted an IFA to review all the options provided but he quoted nearly £1k fee and lost interest when he realised that the pension pot/company would not pay commission.

IFAs are not allowed to receive commission. If there is a legacy commission that is paid that cannot be avoided, then it must be offset against the fee or refunded to you.

The thing that probably caused them to lose interest was it being just £40k and with a GAR. However, as they gave their fee, they didnt lose that much interest. It they were not interested, they would say so by mentioning it is below their minimum value or they would have put the fee high enough to act as a passive blocker.

Coben

Thanks for the quick reply Dunstonh. That is reassuring that at 10 year point, it does not have to be reviewed/more decisions taken.
The option without the 10 year guarantee increased the annual pension by just £50 p/a.


The original illustration provided was more like GAR rate of 12% single life but guaranteed for 10 years so that was considered i.e. £4816 x 10 yrs but then I thought if my wife lived for more than 14 years, she would at least continue to get a small amount to boost her final salary pension and SP if I purchased joint life? Not sure if I am thinking on the right lines though..

Linton

The "guarantee" ensures the pension will be paid for at least 10 years even if you both die, I guess to your estate or to someone nominated by you.. As Dunstonh says this isnt really what you are after, its the "joinrt life" that means that when you die the annuity payments go to the Mrs for however long she lives.

xylophone

You mention that your wife has her own Final Salary pension.

Has she obtained a state pension forecast?

https://www.gov.uk/check-state-pension