Retirement without a pension - is your spouse or partner protected?

Thousands of widowed women every year are sentenced to a life without regular retirement income because their husbands took the wrong financial advice at retirement. Those in the baby boomer generation, who are now reaching retirement, tend to rely on their husband's pension, but worryingly, six out of ten married men purchase a single life annuity when they retire, leaving their partners with very little when they die.

Single life annuities pay a higher level of income than joint lifeannuities, but payouts stop when the annuitant dies. A joint life pays less each month, but guarantees to pay a pension to the widow for as long as she or he lives. This could either be a reduced payment, meaning you will get bigger payouts while you are both still alive or you could choose for payments to remain the same, even in the event of a death.

According to Aviva, only 41% of married men aged over 65 who buy an annuity choose a joint life annuity, which would provide a widows’ pension. This figure drops to 29% for those under 65. Pensioners are often making this decision because they’re not aware of all the options available to them, instead they are keen to maximise their immediate retirement income through a single life annuity.

Information and quotes for annuity rates, which are sent to customers, are typically based on single life annuities.  This highlights the importance of taking advantage of The Open Market Option, which means you don't have to take the pension offered to you by your pension provider. Instead, you have the right to take your built-up fund to another provider to get a better annuity rate. It costs nothing to take advantage of this option and new Association of British Insurers’ rules mean that your insurance company must now tell you about it.

Buying an annuity is one of the biggest financial decisions you will make.  Once you have bought one, there's no going back, so making sure you get it right is vital. Taking the time to speak to your family and a financial adviser about the decision will help ensure it is the best one for you.

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