As you grow old with your partner, you tend to share more and more. In addition to possibly sharing a home, you might share a car and a number of financial products. Joint bank accounts and joint mortgages are a prominent notion amongst with many couples. However the financial offerings for loved ones do not stop there. Many people opt for joint life annuities in later life in order to protect their partner in the event that the worst should occur.
Although we all hope that we will be able to look after our loved ones as long as we live, we cannot predict the future. This is why many people decide to take measures within their control in order to provide for their spouses regardless of what the future holds.
What is a joint life annuity?
A joint life annuity works in a similar way to the standard annuity; offering consumers an income throughout their retirement period in exchange for a lump sum which usually stems from a pension fund. Annuities provide a method of financial security which can be sustained for your full retirement period.
The way that a joint life annuity differs is that this type of annuity is paid to both you and your partner and will continue to provide an income to your partner when one of you passes away. This is often known as the ‘last survivor’ annuity as the surviving annuitant will receive payments for the remainder of their existence.
Would they receive the full amount?
This would be a decision made when taking out the annuity. You can opt for your partner to receive the full amount of the annuity but most annuitants choose for annuity payments to be either 1/3, 1/2 or 2/3 of the original income in the event of death.
How much will I receive?
As with all annuity payments, the amount of income that you will receive is calculated based on a number of factors including your age, your health, your sex and your lifestyle. The provider will utilise these and a number of other factors to gauge an estimated life expectancy which your annuity rate will then be based on. With joint annuity packages, the life expectancy of your partner will also be considered by your provider.
Are there any drawbacks?
Because providers will be paying out for the remainder of two lives instead of one, joint life annuities tend to be a more expensive annuity option. This means that income payments you receive are likely to be less than a single life annuity. As providers evaluate the life expectancies of both the annuitant and their partner, issues can occur when one partner is considerably younger or healthier than the other and this could also affect the amount that you receive.