Guaranteed annuity rates (GARs)
Guaranteed annuity rates (GARs)

The following Pensions practice note provides comprehensive and up to date legal information covering:

  • Guaranteed annuity rates (GARs)
  • What is a guaranteed annuity rate (GAR)?
  • Is a GAR a safeguarded benefit or a flexible benefit?
  • How to determine whether a member has a GAR
  • Is there a duty to notify members of the existence of a GAR?
  • From 6 April 2015
  • Before 6 April 2015
  • How to value GARs

What is a guaranteed annuity rate (GAR)?

Many pension policies issued before 1988 offered their members a GAR.

A GAR is an entitlement to a specific annuity rate which is triggered if the member buys an annuity from their pensions provider. It may give a member a higher level of income than what is available in the open market, especially if the GAR was offered at a time where market annuity rates were higher than what they are now. A GAR may therefore be valuable.

However, it is important to check the terms and conditions attached to a GAR as some GARs may come with conditions, eg:

  1. some GARs may only be taken on the scheme's selected retirement date (eg they may not be available to a member who takes early or late retirement)—note however that some pension providers may provide a grace period during which a GAR continues to be valid beyond the member's normal retirement date, or

  2. a GAR may not necessarily apply if the member wants joint-life cover (as opposed to single-life cover) or if they want their annuity payments to escalate (ie to be inflation-proof)

The terms of a GAR vary from one pension provider to another and sometimes from one policy to another within the same pension provider.

While GARs will mostly be relevant for members of personal pension schemes, some occupational pension schemes

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