Overlap is an option on an annuity that allows the annuitant to choose when they’d like a dependant’s annuity to start, if they have opted for both a Joint Annuity and a Guarantee Period. An annuity policy can be set up on a ‘with’ or ‘without’ overlap basis.
If the annuitant dies during the guarantee period, then the continuing annuity payments can start either at the end of the Guarantee Period or from the date of the annuitant’s death.
If the annuitant chooses from the date of their death, should they die during the Guarantee Period, it will mean that their surviving dependant will receive two incomes for the remainder of the guarantee period, as the payments would ‘overlap’. The main point to consider is, does the beneficiary that will receive the continuing pension need two incomes should the policyholder die soon after the policy is started?
The diagram below from Just Retirement graphically demonstrates the difference between the two options.
With or without is just one of the many options available to retirees when annuitising and if you are having trouble understanding any of the options and whether they would be of benefit to you then you should go and speak with an independent financial adviser (IFA), the IFA will explain all the options and help you choose the correct ones for your personal circumstances.
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