Guarantee periods

Including a guarantee period means payments will continue for the guarantee period, generally 5 or 10 years, even if you die within that time. (Remember, regardless of whether you include a guarantee period or not, you will always receive income for the whole of your life).

The shorter the guarantee period, the greater the initial pension to you. Consider this option if you need to provide for financial dependants, but in which case, you should first consider including a partner’s pension.

Payment of the guarantee

Depending on the type of pension plan you have, if you opt for a guarantee you may also be able to choose how it is paid. The different guarantee repayment options are:

· Income: The pension income continues until the end of the guarantee period.

· Lump sum: an immediate single payment, in lieu of the payments of pension income until the end of the guaranteed period. The lump sum may be lower than the sum of the remaining payments to reflect it being paid immediately.

There is a negligible difference in cost between these two options. Please note that guarantee period payments could, depending on circumstances, be liable to inheritance tax.