Example of Guarantee Period

When he turned 65, Richard retired with a £30,000 pension fund. He used this to buy a single life annuity. Richard wanted to ensure that his family wouldn’t lose out if he should die early, so he protected his annuity with a 10 year guarantee period. Four years later, Richard sadly died. During the four years he was retired, he received a total of £8,556 in annuity income. Normally an annuity would end on death – but because Richard protected his with a 10 year guarantee period, it will continue to pay £2,139 a year for the next 6 years. The money will be paid to his estate.

Example of Value Protection

Mr White retires at age 60 and buys a Joint First Life Annuity with Value Protection for himself and his wife. To do so, he uses his pension fund of £100,000. Sadly, just two years after retirement, Mr White dies. During his two years of retirement, he has received £8,000 in income, leaving £92,000 unpaid from the purchase price of his annuity – which now becomes the Value Protection payment. After 35% tax has been deducted from it, Mr White’s estate receives £59,800. As his wife is still alive, and they chose a 100% Joint Life Annuity, she will also continue to receive an income of £4,000 a year for the rest of her life.

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