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Retirees risk leaving partners pensionless

Fewer than half of couples over 40 have made arrangements to ensure one partner will continue to receive a retirement income after the other dies.

Women over 40 are most at risk with one out of five or 20 per cent currently planning to rely entirely on their other half for a retirement income.

That’s compared with only 5 per cent of men, according to new research by pension provider Prudential.

Despite many spouses relying on their partner to support them in later life, 28 per cent of couples haven’t discussed the impact that one partner’s death would have on their pension arrangements.

In fact, the study shows 41 per cent of couples haven’t even talked about how they will convert their pension savings into an income.

Turning pension savings into pounds

One way of doing this is to purchase an annuity.

This is a financial product which you pay a lump sum into - typically your private pension fund - and in exchange you receive a regular monthly income.

Most annuities guarantee to pay out an income for the remainder of your life.

But you can arrange to have the income still paid to your spouse or partner after you die – through a "joint-life" annuity.

Joint-life annuities

The study shows only 10 per cent of couples over 40 currently plan to purchase a joint-life annuity, which could be down to a lack of awareness among many people about their options in retirement.

When looking at whether a joint-life annuity is right for you, Prudential retirement expert Vince Smith-Hughes has the following advice:

"You should first determine whether an annuity is the right choice for you.

"And if it is then choose what type suits you best, either a single or joint-life annuity.

How to decide what is right for you

"To decide, your starting point should be to think: ‘If I were to die what would happen to my partner?’

"If the answer is that they’d be alright money-wise – you have other sources of income – then a single-life annuity may be ok.

"But if you decide they wouldn’t be able to cope financially then you may want to consider a joint-life annuity."

Weighing up your options

The initial income you receive from a joint-life annuity can be lower than if you had bought a single-life product - about 20 to 25 per cent lower, according to Smith-Hughes.

But this shouldn’t be your only consideration, he says.

"The danger is that some people will just opt for the highest income straight away without thinking about what’s right for them."

To make an informed decision, Smith–Hughes says you should educate yourself about all of your options in the run up to retirement.

He suggests speaking to a pensions specialist as well as looking at the free information which is widely available from independent organisations such as the Money Advice Service and the Pensions Advisory Service.

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Adam Jolley

Adam Jolley

Adam Jolley is a writer at Confused.com, focusing on credit cards and financial products. Wannabe mountaineer Adam joined us from the world of financial services PR.

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