Dependant’s or ‘joint’ annuity
One of the potential risks of purchasing a conventional annuity is that on your death, unless you have selected a guarantee period on your annuity, or a dependant’s, spouse’s or civil partner’s pension, your payments will stop. Anyone reliant on that income may then find themselves in some difficulty.
To overcome this, most annuity providers offer the option of selecting a spouse’s, civil partner’s or dependant’s annuity. This enables your income payments to switch to your spouse, civil partner or someone financially dependent on you, such as a long term partner, should you die before them.
Choose the amount of income
You can decide how much of your income they will receive – for instance 50% or 100% – and this will continue to be paid to them for the rest of their life.
Consider how it reduces your annuity income
Selecting a dependant’s annuity will reduce the amount of income you receive from the start, and selecting a higher percentage of your income as a dependant’s annuity will reduce it further.*
Weigh up your options
You will need to weigh up the peace of mind benefit this option provides, with the reduced income you receive from the point you take out your annuity, and whether you have existing provisions such as life assurance which should be considered.
*It was announced in the Chancellor’s Autumn Statement on 3rd December 2014, that on or after 6th April 2015 all Joint-life annuities can be paid out to any beneficiary and where an individual dies under age 75 with a joint life or guaranteed term annuity, any payments to beneficiaries will be tax free.
If you die later, the income will be taxed at the dependant’s marginal rate of tax. Changes are subject to final legislation.