Guaranteed period annuities
Guaranteed period annuities provide peace of mind when investing in your future as they guarantee income for a set period, even if you die. Whilst the rate they pay is marginally less than a standard annuity, a guaranteed period annuity allows you to fix a 5 or 10 year guarantee to your annuity. If you die in this period the insurance company will continue paying your annuity to your estate. This payment can continue as a monthly payment. Some insurance companies may offer to pay out a lump sum, slightly reduced from the total amount you would get through monthly payments, due to having less time to make money on investments on capital held within the fund.
A guaranteed period annuity alleviates a little of the worry you may have about handing over your pension fund, and as such a lifetimes hard work, to the annuity provider and then by dying the next day losing the lot.
With a guarantee period you guarantee yourself a certain amount of money, even if you are not alive to receive it. The flip side of this worry is that you may live to well over the average life expectancy and receive a lot more from the annuity provider than you gave them in the first place.
Thinking of Retiring Soon? Have a look at our Annuity Comparison Table
These schemes should not be confused with, or replace joint life annuities which will continue to pay your spouse for his/her whole life in the event of your death. It’s also worth taking note that payments made after death could be subject to inheritance tax.
If you are unsure as to which type of annuity would suit your circumstances best, it could be a very good idea to consult with an IFA.