What is a joint life annuity?

21st December 2011

When it comes to retirement annuities there are two main options available for you – single life annuities and joint life annuities. Depending on whether or not you have a partner, a joint life annuity may be a big consideration that you have to make. Upon death the biggest concern of many people is that their partner may be left struggling, or without enough money to  lead a comfortable life. In this situation a joint life annuity can provide reassurance that upon death, a partner will be protected and still receive an income.

There are many factors to take into consideration before you purchase a joint life annuity. In many cases the health and age of  your partner needs to be considered, if one partner is significantly older/younger or healthier/unhealthier than the other it can have a major impact on  the annuitant’s retirement income and could in fact draw their partner’s retirement income down.

What are some benefits of a joint life annuity?

There are many benefits of a joint life annuity and in many cases these are tailored to ensure the peace of mind of  the annuitant, who may be concerned about how their partner would fare upon death. Joint life annuities are designed to ensure that both partners receive a retirement income and that if one were to die unexpectedly, the other could still receive a retirement income. Joint life annuity can also protect a partner who may not otherwise be entitled to their partner’s pension if they were to die unexpectedly. In many situations this can leave one partner in a poor financial situation.

What are some disadvantages of a joint life annuity?

There are several disadvantages of joint life annuities, but the most common occurs when one partner is significantly younger or healthier than the other. Annuity companies work on the premise of how long you are expected to live when they determine your pension income – if you are younger and healthier then you are likely to live longer than someone who may be older and unhealthier. If you are taking out a joint annuity then it works on the life expectancy of both of you, therefore if one partner is much younger and healthier than the other they could substantially bring down the income amount that their partner may receive from a single annuity.

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