Joint Life Annuity
Joint Life annuities differ from Single Life annuities by providing cover after death for a surviving spouse. The amount paid to your spouse after death is typically expressed as a percentage. The table below illustrates some of the more common amounts. Certain funds will only supply a spouse pension at a particular amount. Due to these requirements, if you are not married or can provide for your spouse otherwise, a single life annuity maybe the more cost effective solution for you. It is important to note that while these percentages can have a negative effect on spousal income, they are based on the income being paid at the time of death. An escalating annuity is therefore beneficial in this environment and the spouse income will rise in proportion to main pension.
Illustrated Example
By opting for a Joint Life Annuity you will reduce your initial annuity income, since the same purchase price is having to provide income for a potentially longer time period(should your spouse survive you). The higher the spouses pension percentage the greater the reduction in your income. The illustrated example below is representative of a non-escalating annuity, no guarantee period and a purchase price of £50,000.
| Spouse's Pension | Initial Annuity Income |
|---|---|
| 0% | £3,188 p.a. |
| 50% | £2,915 p.a. |
| 67% | £2,838 p.a. |
| 100% | £2,711 p.a. |
Spouse's Pension - with or without an annuity guarantee?
If you choose an annuity with a spouse's pension AND an annuity guarantee period you are offered a choice regarding when the pension commences:
i. Upon Death (with overlap) OR
ii. At the finish of the guarantee period (without overlap)
If you do choose 'with overlap' you will receive a lower income from the annuity.
+ PROS
If you elect to receive a spouses pension, you spouse will have a level of provision for their remaining years.
- CONS
The annuity income you receive will be less than that of a single life annuity - This is the provider factoring in your spouses life expectancy.
