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

The following Pensions guidance 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?
  • 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