Single or joint annuities
An annuity pays a regular retirement income – usually for life. If buying a lifetime annuity with your pension pot, a key decision you’ll need to make is whether you want an income just for yourself or one that would continue to pay out to someone else after you die.
With a single-life annuity you receive an income until you die – after that the payments stop.
It could therefore be suitable if you have no financial dependants, or if your partner has their own pension arranged, or if they have a shorter life expectancy than you.
The only time the income would continue after you die with a single-life annuity would be if you also opted to have ‘guarantee period’.
Which means the annuity continues paying income for a set number of years after you take it out.
A joint-life annuity provides you with an income for life. It then transfers to your spouse, partner or any other chosen beneficiary when you die and pays them a regular income for the rest of their lives.
Or it can be used to pay income to your dependent child, usually until they’re 23.
A joint-life annuity could be particularly suitable if your spouse or partner doesn’t have their own pension arrangements, or if their pension payments won’t be sufficient to meet their financial needs.
When you die, the income paid to the person you chose will be a proportion of the income you were getting just before your death.
You have to choose the proportion when buying your annuity.
It could be, for example, 100%, two-thirds or half of your retirement income at the time of your death.
The higher the proportion you choose, the lower your retirement income will be – most people choose a half.
Things to be aware of
Don’t forget to plan for your spouse, partner or other dependants if they rely on you for income.
It’s important to pick the right type of income for you and any dependants.
Here are a few things to consider before you decide:
- A joint-life annuity usually will provide a lower income than a single-life annuity because the insurer will expect to make payments for longer.
- Some providers might not agree to set up a retirement income for a spouse or partner if they’re more than 10 years younger than you.
- The most commonly available joint-life income levels provide a half, two-thirds or 100% to a dependent or other beneficiary after you die. Selecting one of these levels will give you the widest selection of providers to choose from – however most people choose a half.
Under new pension rules there are no restrictions on who you can choose to receive joint-life annuity income after you die.
But check with your provider as they might limit who you can choose.
Other annuity options to decide on
As well as choosing between a single or joint-life annuity, you’ll need to decide whether you want your (and any nominated beneficiary’s) income fixed for life or to increase – and/or fall – over time.
See our guide Fixed or increasing annuity income.
There are also extra features you can opt for, either to guarantee annuity payments for a set period from the time your annuity starts, even if you die, or to guarantee that your estate gets back at least what you put into annuity if you die before the value of your pension pot used to buy it all been paid out.
See our guide Protecting your retirement income.
If you have a medical condition or a poor lifestyle you might qualify for a higher income, called an enhanced annuity.
Compare lifetime annuity rates
To compare how much retirement income you might get from a single or joint-life annuity use our comparison tables below.
They also explain the other choices you need to make about your annuity income and how to decide which might be suitable for you.
Use our annuity comparison tables
Get advice before taking out an annuity
Once you take out an annuity you can’t change your mind – and it’s just one of several options you have for taking your pension.
So it’s important to be sure it’s the right choice for you.
For an overview of all of your options and to find out where to get help and advice, including free government-backed guidance from Pension Wise, see our guides below:
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