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Single life vs. joint life annuities

 

by Roger Marsden
Head of Retirement Solutions Products and Services

“Money’s only something you need in case you don’t die tomorrow.” - Carl Fox, Wall Street, 1987.

It’s easy to get on board with a quote like this. But think about it for more than a New York minute and you’ll realise just how flawed it is. Why? Because even after you die, your money could help provide for the people you leave behind. And there’s more than one way to make that happen…

You can leave an inheritance, of course. You can choose an annuity that guarantees your income for a set period of time, even if you die early. You can also buy a joint life annuity, which gives you a retirement income and makes sure that your spouse, civil partner or dependant continues to get an income for the rest of their lives should you die first.

You can’t believe everything you read in the papers

You may have read in the papers recently that the industry and regulators could do more to raise awareness about the benefits of joint life annuities. I’m not sure that’s fair.

We certainly tell our customers about them: we include information about joint life annuities in pre-retirement letters, and we encourage people to make sure they understand all their options before they make retirement decisions. Why wouldn’t we? We don’t benefit from selling a single life annuity over a joint life annuity.

In fact, I can tell you from industry research that the vast majority of people do know about joint life annuities.  I can also tell you that less than half choose joint life – that might be because they have other provisions in place or simply because it’s not right for them. Everybody’s different, which is why it’s so important to think about your own personal circumstances and choose retirement options that match them.

The beauty of a well informed decision

The thing about a joint life annuity is that you get a lower initial income than a single life annuity because it continues to pay out after you die. Essentially, you’re trading some of your income for peace of mind. Only you can decide if you want to do that, but I’d recommend getting professional guidance or financial advice to help you.

You can’t change your mind once you’ve bought an annuity, and customers who receive professional guidance or financial advice are more likely to choose joint life. That’s the beauty of a well informed decision: whatever type of retirement income you go for, it could help you avoid a mistake that’ll live on after you’ve gone.

Watch my video about joint life annuities. Or use our Retirement income calculator to understand the options available when you buy an annuity, the benefits of choosing them and the impact they’ll have on your income.

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