One feature of an annuity is that it is only paid for as long as you live. This is always the case, whether you die one year, 10 years or 45 years down the line. If you die soon after taking out the annuity and have not chosen value protection when you set it up, your pension pot is then kept by the annuity provider – there may be nothing for your family.
An Annuity Guarantee Period works by providing a guaranteed period over which the annuity will be paid. This is usually over five or 10 years, but there is no limit on the guarantee period you choose. The annuity will continue to pay over this guaranteed period if you die during this initial term. However, should you die after the guarantee period ends, the annuity will stop paying.
If you're considering an Annuity Guarantee Period so that your spouse or partner has an income for a time after you're gone, you should also consider a joint annuity. Although this may pay a lower income than an annuity just for you (especially if your partner is younger or healthier than yourself), it will continue to pay until you both die. The payout to your spouse or partner will depend on the choices you make when you take out the annuity.
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If you are unsure how your partner or family would cope financially when you die, you should seek independent financial advice to run through the full range of options open to you.
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.