What are safeguarded benefits?

Safeguarded benefits provide a secure pension income after retirement. The calculation of this income can vary, but are often based on defined benefit schemes such as final salary that are not money purchase or cash balance benefits. 

It may also be a predetermined rate that allows you to convert your accumulated funds into income at a specified future age, providing certainty in managing your retirement finances.

If an individual has safeguarded benefits valued at more than £30,000 within a pension, they are required to seek financial advice before taking certain actions. There are three types of safeguarded benefit:

Defined benefit schemes or final salary

The calculation of your benefit in many final salary schemes is tied to your length of service and the salary you've earned at the time of leaving the employer or retiring. 

This ensures that your pension reflects your years of service and the level of compensation you received during your working years.

Guaranteed minimum pension (GMP)

You will have a GMP when you ‘contracted out.’ You will have a GMP if you were a member of a defined benefit public sector pension scheme between 1978 and 1997. The GMP represents an income that is equivalent to those that didn’t contract out.

Contracting out also refers to contracting out of an additional state pension (also known as SERP) which is an extra pension paid on top of your basic state pension. 

Guaranteed annuity rates (GAR)

This is where the waters get a little muddier. GAR where the annuity income offered by the provider is a higher than the market annuity income rate.

However, the safeguarded benefit is applied to a defined contribution schemes (where money accumulates into a pot) rather than a defined benefit scheme. (pension income based on service).

Get expert advice

Considering all of this, it's very important to seek financial advice before making any decisions. Trasnferring out any final salary benefits or safeguarded benefits is final; you cannot reverse your decision. Therefore, any decision needs to be based on a careful, expert assessment of all circumstances. 

Let Regulated Advice match you with a financial advisor for expert advice.