Guaranteed annuity rates: check the conditions before moving an old pension
Some older pensions contain a guaranteed annuity rate: a contractual basis for converting eligible pension money into income. That feature can be valuable, but its value depends on the conditions and the kind of income it provides.
Before transferring or withdrawing from an old policy, ask whether a guarantee exists and obtain the terms. A comparison based only on current charges or investment choice can miss something important in the existing contract.
Ask the provider for a specific confirmation
MoneyHelper explains that a guaranteed annuity rate may have been set when the policy began and can differ from rates available in the market now. Conditions can restrict the age or annuity options to which it applies. MoneyHelper: guaranteed annuity rates.
Ask the provider whether your policy has a guarantee, which funds it covers and where the contractual wording can be found. Terms such as with-profits or retirement annuity contract can prompt a question, but they do not prove that every policy with that label has the same benefit.
Retain the written answer. A vague statement that the pension has “some guarantees” is not enough to compare the actual options.
Identify the dates and conditions
Check the age or period during which the rate can be used, any notice requirements and whether taking benefits earlier or later changes it. Record the deadline in the retirement plan rather than leaving it in a provider letter that may be overlooked.
Also establish what happens if you take tax-free cash, transfer part of the pension or change investments within the policy. Do not assume an action leaves the guarantee intact unless the provider confirms it.
Where terms are ambiguous, ask for an illustration based on the exact action being considered. A general product leaflet may not resolve the wording of a particular historic contract.
Compare the income features as well as the rate
An annuity can differ in whether payments rise, continue to a survivor or include a guarantee period. A higher starting payment can be paired with fewer protections for later years or other people.
The general annuity comparison therefore needs the same features on both sides, wherever possible. MoneyHelper explains the choices that affect annuity quotations and the importance of comparing available providers. MoneyHelper: annuity options.
If the guaranteed rate is only available on one basis, show that basis clearly. Do not present it as directly equivalent to a market quotation with materially different survivor or escalation benefits.
Put the rate into a bounded example
Suppose a fictional policy offers a contractual 7% conversion rate on £80,000 of eligible funds under specified conditions. That gives £5,600 of starting annual income. A fictional alternative rate of 5.5% on the same amount gives £4,400, a £1,200 starting difference.
These are invented rates, not current quotations or typical guarantees. The arithmetic alone cannot establish which option is suitable. If the benefits, eligibility date or treatment after death differ, the income figures do not describe equivalent promises.
Ask for both gross and expected net income where tax is relevant. Also check whether charges, bonuses or a different eligible fund value affect the actual quotation.
Consider health and the household's needs
Current annuity quotations can take account of health and other information. Supply the requested details accurately when comparing options rather than assuming the old guarantee must always be the strongest offer.
Consider who depends on the income, how essential spending may rise and what other guaranteed income the household already has. A single-life, level payment may meet one person's needs but leave another household with a gap after a death or over a long retirement.
The existence of a valuable rate is a reason for careful assessment, not an automatic instruction to buy an annuity regardless of circumstances.
Resolve transfer requirements before signing
Ask whether the benefit is treated as safeguarded and whether regulated advice is required for the proposed transaction. The provider should explain its process and the evidence it needs. Do not assume an ordinary online transfer instruction can deal with every historic benefit.
If an adviser recommends giving up a guarantee, request a clear explanation of what is lost, how it has been valued and why the alternative is appropriate. Compare that reasoning with the written provider information.
The decision should leave you able to explain the guarantee in plain language: when it can be used, what income it provides, which conditions apply and what happens if you move the pension. That is a stronger basis for action than choosing between an old policy and a new one on appearance alone.
Related reading
Sources and context
General educational information, not personal financial advice. Examples are illustrative unless identified as recorded evidence.
Sources checked 18 September 2026. Our editorial standards.