Know your pension

It is important to understand the type of pension you have and the benefits you might be giving up.

Does your pension come with any important features?

Below are two of the more common features. However, there might be other important features that apply to your policy. Please also see your plan documentation.

Guaranteed annuity rate

Check whether your current plan offers a Guaranteed Annuity Rate. If it does this is extremely valuable and could significantly increase the amount of income you receive from your pension savings.

Your retirement pack will have highlighted this but check whether any conditions apply – such as taking it on a certain date, can it be taken on a joint life basis. If you choose to move your pension pot to another provider you will lose your guarantee – so consider your needs carefully.

To demonstrate the value of this guarantee we’ve provided an example.


Here’s an example of the difference a guaranteed annuity rate could make to a pension. It assumes the guaranteed annuity rate applies to the whole plan. This example is based on typical rates currently available, although annuity rates on the open market change all the time.

Annuity rates are often expressed as a yearly income for every £1,000 of pension fund. If the annuity rate on the open market is £50 yearly income for every £1,000 of pension fund, a fund worth £50,000 will give a yearly pension of £2,500.

If a guaranteed annuity rate is £90 yearly income for every £1,000 of pension fund, then the same £50,000 pension fund would give a yearly pension of £4,500 if the guaranteed rate is used.

In this example you’d get £2,000 more every year for the rest of your life. That nearly doubles the amount you’d get if you didn’t use the guaranteed annuity rate.

Market value reductions (MVRS)

If you take benefits from your pension pot at a different date from your Normal Retirement Date we may apply a Market Value Reduction which will reduce the amount you get. Your plan documentation should confirm the retirement date on your plan.

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