APPROACHING
Annuities (continued)
Single or joint life annuity?
Annuity guarantees
A joint annuity will give your partner more financial
security. The next decision is whether you want an
annuity that covers you alone, or an annuity that
protects your partner as well.
Where an annuity has a guarantee period, it will be
paid out for a set time, usually five or 10 years, even
if you die during that time. If you do die during the
annuity's guarantee period, the payments may
continue as an income to your survivor(s) for the
remainder of the annuity period, or sometimes can
be rolled into a lump sum.
A single life annuity pays you an income until you
die, but if you are part of a couple and die first, this
could mean that your partner is left short of money.
A joint life annuity continues to pay some or all of
the annuity income to your partner when you die.
There are of course some trade-offs for a joint
annuity's extra provision. Because a joint life
annuity will continue to be paid after you are dead,
the rates offered are lower. The higher the
proportion of your annuity income that you choose
to be paid after your death, the lower the initial
income paid by your annuity.
An annuity with a guarantee is sometimes seen as a
substitute for a joint life annuity. It's not the same,
however, as the maximum annuity guarantee period
is only 10 years. As a result, an annuity guarantee
won't fully protect your dependants in the long-term.
If your partner is younger than you, the insurance
company will offer a lower annuity rate, as it expects
to pay out the annuity for longer.
Key points
There are options for single or joint annuities –
explore all of these
Shop around if you want to buy an annuity.
Rates can vary enormously
Payments from your annuity will be taxed as
income at the prevailing rate (usually at source
by your annuity provider)
SINGLE
?
JOINT
Page 47