Joint life annuity
If you have a defined contribution pension scheme, you are likely to be eligible for a joint annuity policy. Many want clear information regarding the potential risks of joint annuities plus the benefits before committing to purchasing to help with their retirement planning.
In this article, we’ll be looking at the following:
- What is a joint life annuity?
- What rates are available?
- Joint life annuity calculator
- Speak to an advisor
If you would like to learn more about joint annuities, call us on 0808 189 0463 for a free, no-obligation chat with a pensions expert. We only work with accredited advisors who can provide you with the most relevant information.
What is a joint life and survivor annuity?
A joint life and survivorship annuity is a type of retirement plan which provides a lifetime monthly income for both the annuitant and their chosen beneficiary. They are designed so that the payments will continue as long as either spouse is alive.
For example, if the annuitant passes away before the beneficiary, the latter will continue to receive their annuitant’s pension, though usually at a reduced rate. A beneficiary under 75 would get a tax-free income but would be taxed after 75. Find out more about annuity tax.
A beneficiary could be a current or former spouse, a civil partner, someone who is financially dependent (such as a child under 23 years old), or another significant individual. In some cases, you can split your annuity with more than one beneficiary.
You can transfer all or a portion of your funds to a life insurance provider who will guarantee an income for you both, although you may wish to withdraw your 25% tax-free lump sum before doing so. You could choose 100%, 75% or 50% of your pension pot, though bear in mind that the higher proportion you choose, the lower your monthly income may be.
Joint annuities could be an ideal option if your pension is larger than your chosen beneficiary’s and you want to protect them with a guaranteed income for the rest of their life. For example, if your life expectancy is likely to be shorter than your beneficiary’s, then a joint and survivor annuity may be a good option.
If you decide to take out a joint life annuity policy with value protection and you pass away within the protected period, your unused pension will be payable to your beneficiary. To find out more, speak to an advisor.
The potential drawbacks
With joint annuities, tax could be a little higher than for single products.
If you decide to add extras to your policy (such as a guarantee period or increase in pension funds) the less income your will get per month, though this amount will vary due to personal circumstances (including age and general health) and company criteria. We can put you in touch with one of the experts we work with to discuss your options – make an enquiry today.
Read more information regarding the pros and cons of annuities.
What rates are available?
Rates for joint life annuity policies fluctuate all the time, so the exact income you could receive will depend on what the current market rates are at the time of purchase, your pension pot size, personal information, and any additional extras you may choose.
For the latest joint annuity rates, speak to a pensions advisor. They can work with you to find a policy with the best rates based and help calculate your potential returns.
We work with advisors who can research the current market on your behalf to find a provider who can offer you the best deal. You can opt for a fixed income which provides you with the same income year after year, or an increasing income to help protect your income from rising prices.
We’ve put together a joint life and survivor annuity tables containing rough estimates and is intended to be used as an for example purposes only.
£100,000 joint life with 50% paid to beneficiary with 5 year age gap, 5 year guarantee and 3% p.a. escalation:
|Est. Annual Income:||£2,300||£3,400||£4,200|
£100,000 joint life with 50% paid to beneficiary with 5 year age gap, 5 year guarantee and Fixed income:
|Est. Annual Income:||£3,900||£5,000||£5,850|
For more accurate joint annuity rates tailored to your needs, contact us today to chat with one of the pensions experts we work with. All our the experts we work with are fully vetted and offer free, no-obligation information to help you with your pension plans.
Joint life annuity calculator
For a rough estimation of what returns your joint life annuity policy could provide for you, try a UK calculator.
Pension Wise has a basic calculator where you enter your pension pot amount and age to get an estimation, though it does not take into consideration any other important factors, such as your retirement needs and personal information. For more accurate rates based on your circumstances, speak with a pensions expert.
We’ve put together a short list of common questions regarding joint life and survivorship annuitiesy.
Can I withdraw from my joint annuity policy once I’ve taken it out?
Once you take out a joint life annuity, you may find it difficult or even impossible to withdraw from your policy. For more information regarding how flexible your joint annuity policy can be, speak to an expert.
Can I remove my former spouse from my joint and survivor annuity?
Your ability to remove your existing beneficiary from your joint and last survivor annuity policy will depend on the original pension agreement.
For example, if you and your spouse separate and they are named on the joint annuity agreement, this annuity may be taken into account when the divorce settlement is calculated, so there may be further complications.
You may be able to take out a joint and survivor annuity which provides you with more flexibility. Find out more by making an enquiry.
Speak to an advisor
If you’re interested in getting a joint life annuity quote or want more information about how they work, give us a call on 0808 189 0463 or message us here. We will put you in touch with a pensions expert who will be more than happy to talk with you.