Guarantee Period Annuity
A Lifetime annuity immediately guarantees payment for the rest of your living years. Upon death these payments will stop. However by utilising a guarantee period, these payments will continue for the minimum agreed term, in the event of your early death. Usually the guarantee period is 5 or 10 years and annuities without this period are generally referred to as having 'no payment guarantee'.
There is a small cost for the guarantee which differs between providers and is reflected in a slightly reduced annuity income.
How will this affect payments? Below we have illustrated the effects of taking this guarantee. The example annuity is a single life annuity with a purchase price of £50,000.
| Guarantee Period | Initial Annuity Income |
|---|---|
| None | £3,188 p.a. |
| 5 Years | £3,176 p.a. |
| 10 Years | £3,143 p.a. |
As the table illustrates, the cost involved is small for the peace of mind this can offer yourself and your financial dependents.
+ PROS
Guarantee period provides an element of value for money in the event of your early death (This should not be seen as an alternative to a joint life policy as payments will cease at the end of the guarantee period).
- CONS
Guarantee is only applicable for the period specified.
Income is marginally lower than without guarantee
