A guaranteed annuity rate, commonly known as a GAR, is a fixed rate, written into your pension contract, at which you can convert your fund into an annuity at retirement, irrespective of what open market rates are doing at that time.
There are normally some conditions written into the application of the GAR. It is usually only available at the scheme’s Selected Retirement Age i.e. it will not apply if you retire early or if you retire late.
A GAR will normally only provide an annuity on your own life and often will not provide for post retirement increases. So you must take care if you are married and wish to provide spouse’s benefits on your early death, or if you are seeking a rising income in retirement.
The attraction and value of the GAR is that it can produce a pension for life that is higher than anything you can get by applying your fund to buy an annuity from any other insurance company at the time you retire.
The downside is the restrictions which may apply that are highlighted above, e.g. based on your own life only, and advice should be taken if a GAR is an option open to you at retirement.