Guaranteed annuity meaning

The insurance trade body said that Annuity purchases, which transform a saver’s pension pot into a guaranteed income for life, climbed by 24% in 2024 to 89,600, setting a new ten‑year high. In 2023, annuity sales totalled £5.2bn, with 72,200 contracts completed, according to the ABI. The last high point was in 2014, when £6.9bn of annuity contracts were sold. That milestone followed the government’s announcement of pension freedoms, allowing (largely defined contribution) pension scheme members to draw on their savings before reaching retirement. Those aged 65 were the most frequent annuity buyers, accounting for 20% of all sales...

Original news Mr R (CAS-63759-L4H8)—20 August 2024 Summary The Deputy Pensions Ombudsman has dismissed a grievance concerning entitlement to a guaranteed annuity rate. Accordingly, the complaint regarding the payment method tied to the guarantee failed. Under the policy conditions, the guarantee was only available as an annuity paid yearly in arrears. Should the member opt for monthly instalments, the guarantee would not apply. The member’s illustrations were generic projections and did not specify the form of annuity to be selected at retirement. The Ombudsman’s decision underscores the primacy of the policy wording. What were the facts? Mr R was a member of the Phoenix Life Personal Pension Plan (the Scheme) which was operated by Phoenix Life Limited (Phoenix)...

Original news Mr N (CAS-49110-X6N4)—16 August 2024 Summary The Pensions Ombudsman has found in favour of a complaint concerning an insurer’s refusal to allow flexibility around a guaranteed annuity rate. The complainant held two insurance policies, with only one benefiting from a guaranteed annuity rate. To access that guarantee, the insurer insisted he take all of his benefits with the same provider. The Ombudsman concluded that nothing in the policy wording permitted the insurer to curtail the member’s flexibility in this manner. This determination underscores that the contractual terms are pivotal in defining an insurer’s rights and obligations. What were the facts?...

This Practice Note concentrates on the matters that applied prior to 6 April 2016—the date on which salary-related contracting-out (often called DB contracting-out) was brought to an end—when buying out these contracted-out salary-related (COSR) entitlements: guaranteed minimum pensions (GMPs)—the benefits built up by COSR scheme members as a result of contracting out between 6 April 1978 and 5 April 1997 Section 9(2B) rights (also referred to as post-1997 COSR rights)—the benefits accrued by COSR scheme members as a result of contracting out between 6 April 1997 and 5 April 2016 The legislative requirements that applied differed according to whether the relevant contracted-out rights were GMPs or Section 9(2B) rights. For guidance on the buy-out considerations from 6 April 2016 for Section 9(2B) rights and GMPs, see Practice Note: Buying out Section 9(2B) rights and GMPs from 6 April 2016. For general issues relating to buy-outs, see Practice Note: De-risking—pension buy-outs and buy-ins. For information on the ending of DB contracting-out on 6 April...

This Practice Note sets out the considerations that apply on and after 6 April 2016 (the date on which contracting-out on a salary-related basis—also described as DB contracting-out—was abolished) when undertaking a ‘buy-out’ of the following contracted-out salary-related (COSR) rights: guaranteed minimum pensions (GMPs)—the benefits built up by members of COSR schemes as a result of contracting out between 6 April 1978 and 5 April 1997 Section 9(2B) rights (also called post-1997 COSR rights)—the benefits built up by members of COSR schemes as a result of contracting out between 6 April 1997 and 5 April 2016 The legislative requirements that apply differ according to whether the relevant COSR rights are GMPs or Section 9(2B) rights. For guidance on the considerations that applied before 6 April 2016 to the buy-out of COSR rights, see Practice Note: Buying out Section 9(2B) rights and GMPs before 6 April 2016 [Archived]. For general guidance on buy-out issues, see Practice Note: De-risking—pension buy-outs and buy-ins. For further information...

A-day 'A-day' is the widely used term for the broad pension tax 'simplification' reforms that began on 6 April 2006. The changes covered: how much pension contribution was allowed, the kinds of schemes an individual could invest in, the sums that could be taken (and when), and the choices available for any remaining fund. A-day also introduced the annual allowance and the (now abolished) lifetime allowance. See: Annual allowance and Lifetime allowance. AFPS AFPS: Armed forces pension scheme; see Practice Note: Public sector pensions and family proceedings. Accrual rate The speed at which pension benefits build as pensionable service is completed in a final salary scheme, eg 1/60 for each year of pensionable service. Accrued benefits The benefits earned in respect of service up to a specified date. Added years Extra pension provided by adding further years of pensionable service in a salary-related scheme. Such additional years are secured via transfer payments or through additional voluntary contributions/augmentation...