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        Updated: April 23, 2024

        Lifetime and Guaranteed Annuities

        A lifetime or a guaranteed annuity can provide you with the financial security you need for retirement. Find out more about both types of annuity in this article.

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        A lifetime or a guaranteed annuity can provide you with the financial security you need for retirement, but with so many different pension types on the market, you may be uncertain about which one would work best for you.

        The challenge of buying the right annuity is compounded by the fact that, once you’ve set up a lifetime annuity, the decision usually can’t be reversed. So it’s vital you do your homework and take the time to speak to an expert before making a final decision.

        Read on for some guidance and support on lifetime and guaranteed annuities, or make an enquiry with Online Money Advisor to reach an expert who can help you with questions specific to your situation.

        In this article, we’ll cover…

        What is a lifetime annuity?

        A lifetime annuity is the most common type of pension annuity, it gives the holder, or annuitant, a guaranteed annuity income for the rest of their life.

        The lifetime annuity rate is determined by the provider according to how much you invest and other factors such as your life expectancy and expected investment returns. Buying a lifetime annuity is fairly straightforward: they are usually sold by insurance companies and can be purchased in one large lump sum upon your retirement.

        Speak to a expert today

        What is a guaranteed annuity?

        As the name suggests, a guaranteed annuity is an annuity with a guaranteed income. It provides you with the total security of knowing that your retirement income is guaranteed at a certain percentage of your accumulated fund. Annuities with a guaranteed retirement income can do a lot to boost your pension income. The certainty that a guaranteed annuity provides has made it one of the most highly sought-after retirement products.

        What is the annuity guarantee period?

        The definition of an annuity guarantee period is a period of time in which you will receive guaranteed annuity payments. This pension annuity guarantee period will protect your money from being taken by the provider if you die soon after you set up your annuity. It ensures that your family or loved ones will continue to benefit from payments throughout the entire guarantee period of the annuity.

        What are the pros of lifetime and guaranteed annuities?

        Lifetime annuities

        • A lifetime income: guaranteed periodic payments for the rest of your life.
        • Protection against inflation: inflation can have a devastating impact on your assets but you can customise your annuities to make sure your payments change along with inflation.
        • Tax efficiencies: buying an annuity with your retirement savings can save you money on taxes compared to taking a lump sum of money out of your pension.
        • Predictability: lifetime annuities provide predictable retirement income which can make it easier to plan your lifestyle in later years.
        • Protection of your investment: the value of the money you invest is guaranteed to be returned.

        Guaranteed annuities

        • This could provide you with a guaranteed annuity rate which ensures a higher level of annuity income security than what you might otherwise receive.
        • An annuity guarantee period protects your funds against being lost to the provider in the case of your death.

        As the above examples demonstrate, the benefits of a lifetime annuity or a guaranteed annuity are often related to the security they provide compared to other retirement investment options.

        Lifetime and guaranteed annuities disadvantages

        • Not fixed: Annuity products that aren’t fixed could be expensive and a poor investment.
        • Lower investment yield: The guaranteed retirement income means you give up potential higher risk and higher investment returns.
        • Inflexible: The lack of opportunity to cancel the annuity brings certain risks. You won’t be able to access the lump of money invested as your capital is now tied up in the annuity.
        • Higher costs:Fees for managing annuities can be high.

        The security offered by this type of annuity often comes at the cost of flexibility. Thus, as with all major financial decisions, the way to ensure you’ve carefully considered the pros and cons of a lifetime or guaranteed annuity is to speak to an expert.

        Contact us today and we’ll connect you with a specialist who understands the terms and conditions included in various annuity products. The advisors we work with have years of experience in matching clients with the best annuities providers on the market. You can reach us on 0808 189 0463 or make an enquiry.

        What are deferred lifetime and guaranteed annuities?

        A deferred lifetime annuity, or a deferred guaranteed annuity, is an insurance contract for long-term savings. The definition of a deferred annuity is an annuity product that puts off or defers the stream of payments until an agreed-upon later date. Whether you choose to get a lifetime annuity, or an annuity for a guaranteed period, if you choose to defer the annuity payments your assets can be left to accrue more interest and thus be worth more over time.

        What is a lifetime and annuities calculator?

        A lifetime income annuity calculator could help you find out how much income you need to invest in order to get your preferred sum of regular payment. You can find a basic one of the government’s website.

        It will help you understand the potential of your savings. To find out how much you’ll get in regular payments if you chose to wait and let your investment grow over time, use the help of a deferred annuity income calculator.

        These lifetime annuity monthly payout calculators can often be found on the websites of the various annuity providers and other online financial hubs, but keep in mind that these online tools will only give you a rough idea of your investment’s potential. There’s is a more accurate way to determine this.

        If you’d like help in calculating how much money you’ll be getting per month for a certain amount of pension income invested, ask one of the pension advisors we work with. They will be able to quickly compare rates across the best providers to help you find your ideal annuities product.

        Guaranteed & lifetime annuities income

        A guaranteed lifetime annuities income can be an excellent way to top up your pension pot and provide you with the security you need in later years. But not all annuity lifetime or guaranteed income is created equal.

        Experts know that sometimes only certain annuity types, such as fixed annuities, are worth their weight in gold. The way to ensure you are investing your hard earned money wisely is to speak to a pension expert who is well-versed on calculating best options for lifetime or guaranteed income annuities.

        How do I get the best rates and quotes?

        Annuity rates have seen a sharp decline since their heyday back in the 1980s and 1990s, but that’s not to say you can’t get a favourable rate of return today.

        When looking into the lifetime and guaranteed annuity rates paid out compared to the money you want to invest, it’s important to consider all aspects of the annuity product. What are the management fees? Are there any additional charges? And what are the terms and conditions?

        Make sure you have the full picture in mind and you’re not calculating your rate on a standalone basis. If you’d like help in finding the best lifetime annuity rates and understanding the terms of an annuity product, call us on 0808 189 0463 or make an enquiry. The pension experts we work with can help you compare and contrast lifetime and guaranteed annuity quotes.

        Remember that there are always more guaranteed annuity options and better deals for lifetime annuity payouts than what is immediately visible to the potential holder. Only an expert with specialist knowledge will know when and where to dig a little deeper!

        What rate of return could I get?

        While a fixed annuity pays a fixed rate of return, it’s usually invested in lower risk fixed income products such as government securities or corporate bonds, so you’re always guaranteed the minimum rate of investment return.

        In contrast, the rate of return in a variable annuity fluctuates⁠. The pension owner picks the portfolios to invest in, and often it is invested in riskier assets which could yield a higher or lower rate depending on the asset’s performance. Because of the changing nature of a variable annuity, the rate of return is never certain.

        However, if you do opt for a variable annuity but want some added security, you could get a variable annuity with a guaranteed minimum income benefit.

        These guaranteed income options for variable annuities mean that you can reduce or gauge the amount of risk you take out. An expert pensions advisor can provide you with the full picture of which providers offer the best deals for variable annuities with guaranteed income.

        What other guaranteed annuity options do I have?

        Variable annuity with guaranteed lifetime withdrawal benefits

        A variable lifetime withdrawal benefit variable annuity is an annuity contract that enables both one-off and regular withdrawals to be made from an annuity during the phase when the cash value of the annuity is being built up. Unlike some other annuities, this is a flexible option with no penalty for withdrawals.

        Non-commutable lifetime pension or annuity

        A non-commutable lifetime pension or annuity is an annuity which the trustee made non-commutable, meaning it can’t be taken out as a lump sum payment. This ensures it will provide a steady stream of income payments into retirement.

        Single premium immediate inflation-adjusted lifetime annuity

        An inflation-adjusted immediate lifetime annuity is a type of fixed annuity that makes payouts for the rest of your life. It ensures you receive a guaranteed lifelong stream of regular income from the provider and that income adjusts each year according to inflation. Single premium means that you pay a lump sum, or premium, up front in exchange for the guaranteed lifetime income.

        Multi-year guarantee annuity

        A multi-year guarantee annuity is a fixed rate deferred annuity. It’s single premium which means you pay a single lump sum. This annuity contract allows you to decide when you want to begin repayments, so you receive a guaranteed income for a set period of time of your choice.

        Modified guaranteed annuity

        A modified guaranteed annuity is an annuity contract in which the benefits are guaranteed if you hold the annuity for a specific period of time.

        Speak to an expert pension advisor

        A lifetime or guaranteed annuity can be an excellent pension investment option which provides you with secure regular payments for as long as you choose. They have given many pensioners peace of mind over their financial retirement plan and could be the right investment for you. However, there are many different products on the market, and they all cater to various appetites for risk and situations.

        For more information on whether a lifetime or a guaranteed period annuity is best for you, and how to find the best rates, call us on 0808 189 0463 or make an enquiry. We don’t charge a fee and there’s absolutely no further obligation or marks to your credit rating.

        Ask A Quick Question

        We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions Ask us a question and we'll get the best expert to help.

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        Tony Stevens

        Tony Stevens

        Finance Expert

        About the author

        Tony has worked in a vastly diverse array of areas in the pensions industry for over 20 years. Tony regularly writes for trade press, usually on topical and pensions pieces as well as acting as a judge at prestigious national events.

        Tony is also a highly qualified Independent Financial Adviser in his own right. His mantra has always been “Hope for the best, but plan for the worst”, and believes that the biggest impact that an adviser can have on a client’s life journey is to take them on a journey from generally having little or no real idea of what their retirement will look like, to giving them the understanding of what their retirement looks like now, then helping them navigate a path to what they want their retirement to be.

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