Insurance, pensions and investments specialist, NFU Mutual is
advising couples approaching retirement to consider how their
partner would support themselves during and after bereavement, so
to avoid unnecessary financial heartache.
Commenting on the choosing the right annuity, Shelagh Hamer,
pension specialist at NFU Mutual, said: "It's vital anyone
approaching retirement takes the time to sit down with their
husband or wife to discuss annuity options and implications. All
too often, the forms are signed without considering how one might
get by without the other.
"Single life annuities - typically the default choice for
annuities - leave many women at risk of having no income from their
husband's private pension fund. Joint life annuities are more
likely to offer a longer, happier outcome for married women who are
dependent on their husband's income.
"It's not easy to think about life without your loved one, but
it's something that needs to be borne in mind when choosing the
right annuity. It's a sad fact that many spouses, typically women,
have little or no private pension provision and rely on their
partner's retirement income to get by."
On average, women marry earlier than men and live for longer.
Women who do not secure their own pensions, or help to ensure their
partner chooses the right annuity option, could face a typical 9
years of widowhood dependent on state benefits and, statistically,
a meagre private pension.
Hamer concluded: "It's particularly important women are aware of
these pitfalls as many will have sacrificed their career and the
chance to build their own pension pot to raise a family. Once the
pension is taken, the annuity can't be altered so it's vital that
couples take the time to make the right decision."
To help ensure both partners are provided for, NFU Mutual has
compiled five top tips for couples approaching
retirement:
1. BUDGET, BUDGET, BUDGET
Look at your income and expenditure and try to work out how much
you'll need to get by. Would-be pensioners can be pragmatic with
the level of support they would like their widow to have. A widow's
pension can provide some, or all, of the original annuity but it
will provide a lower income from the outset.
2. CHECK YOUR FACTS
Check your annuity forecasts are based on facts and not
assumptions. For instance, some forecasts will be based on a
husband being in worse health and three years older than his wife.
If, as in many cases the facts are incorrect, the annuity rate will
be out too. Inform your provider and see the figures change.
3. COMPARE ANNUITIES
Don't be bamboozled by the 'Open Market Option' it just means
you're entitled to shop around for the best deal and it can mean up
to 30% extra in your annuity. Try the independent annuity
comparison on www.moneymadeclear.org.uk, but make sure you compare
like-for-like as joint life annuity figures will always be
lower.
4. SPREAD CONTRIBUTIONS
For stay-at-home spouses, a break in career doesn't have to mean
a break in pension contributions. A partner can make contributions
of up to £3,600 a year on behalf of their spouse, which would
include basic-rate tax relief of £720. The tax treatment of
pensions depends on individual circumstances and may change in the
future.
5. UP YOUR CONTRIBUTIONS
If you earn between £50,000 and £130,000 a year,
then now is the time to make the most of the current rules. From
April 2011, the Treasury will implement changes to restrict pension
tax relief, so it's important that some high earners should try to
maximise this year's tax-efficient pension contribution.
Anyone can start taking their pension from age 55. The value of
pensions can fall so you may get back less than you invested.
With over 300 Agency offices throughout the UK, NFU Mutual
members wanting to discuss their financial provisions can book an
appointment with an NFU Mutual Financial Consultant. Members can
even arrange a home visit to talk through their finances in the
comfort of their own living room.