What happens if I die after I’ve bought my annuity?
When dealing with retirement, ensuring that you have a stable source of income is an important part of having a comfortable and relaxed retirement and for this reason many people choose to convert their pension pot into an annuity which will provide them with this stable income for the remainder of their lives.
Unfortunately, in some circumstances an unexpected death can occur quite soon after an annuity has been purchased, and this can have serious repercussions on a remaining partner or dependants who may no longer have the financial means necessary to support themselves. In general, an annuity dies with the investor and as such this type of unexpected death can lead to a severe loss of income unless precautions or insurance measures have previously been taken.
What are some options I could consider if I have a partner or dependants?
If you have a partner then chances are they have already factored into your annuity decision and if you are wanting to ensure that they are covered in the event of an unexpected death, then there are several options available to you:
- Joint annuities – a joint annuity is designed to protect both partners and runs until the death of the final living partner. This is a great way to ensure that your partner is covered in the event of an unexpected death as your annuity income will continue to your partner at a rate you choose, usually 50%, 67% or 100%
- Guarantee Period – with many annuities you can take out a guarantee period which ensures that once you make an investment the annuity is paid for a minimum period of time, even if you die during this time. Usually this is for five or ten years
What are some disadvantages of these types of annuity?
Although looking after your dependants is important, it will have a negative impact on your annuity income. In most situations your annuity income will be reduced, this could happen if your partner is healthier or younger than yourself, or if you choose to take out an annuity guarantee period. As a result, you could find that you receive a lower annuity income