Guaranteed Annuity Rate

In its simplest form, an annuity is a series of guaranteed equal payments paid periodically, monthly, quarterly etc. for an agreed period. To receive the annuity payments an upfront lump sum has to be paid to the annuity provider. In the context of private pensions, you exchange the value of your pension savings on retirement and receive regular income payments (usually paid monthly) for the rest of your life. The rate defines the annual payment and is a function of current market interest rates, age, health, lifestyle, location etc. For example if your pension pot is 100,000 and the annuity rate is 4.00%, you will receive an annual income of 4,000 per year for life.