Of all the conversations we have with clients, this is the one that comes up too late most often. Someone loses their husband or wife, contacts the pension provider expecting the income to continue, and is told that it stopped on the date of death. Nothing has gone wrong. The annuity did exactly what it was set up to do, it just was not set up to do what they assumed.
It is entirely avoidable. But only beforehand, because once an annuity is in place it cannot normally be changed.
Single life or joint life
A single life annuity pays an income for as long as you live, and stops when you die. Because the provider only expects to pay for one lifetime, it offers the highest starting income of any option.
A joint life annuity continues paying your spouse, partner or dependant after your death, for the rest of their life. You choose what proportion continues — commonly 50%, two-thirds or 100% of your original income. Because the provider may now be paying out across two lifetimes, the starting income is lower, and the higher the continuation percentage you choose, the lower that starting income will be.
Neither is right or wrong. What matters is whether anyone else depends on that money.
The question to actually ask
Not “which pays more” — single life always pays more up front. The useful question is: if I died next year, what would my partner actually have to live on?
Work through it properly. Their own State Pension. Any pension of their own. Savings and investments. Then subtract what would still need paying, the same council tax, the same heating bill, the same insurance, largely unchanged whether one person lives in the house or two. If the honest answer is that they would struggle, a higher income for you now is a poor trade for hardship for them later.
Equally, if your partner has substantial pension provision of their own, or you are single with no dependants, the extra income from a single life annuity may be exactly the right call.
Two other protections worth understanding
Joint life is not the only way to provide something after death, and these can be combined with it.
A guarantee period means the annuity will pay out for a minimum number of years regardless of what happens, often between 5 and 30 years. Die within that period, and payments continue to your estate for the remainder of the term. It is a relatively inexpensive safeguard against the worst outcome of all, which is buying an annuity and dying shortly afterwards.
Value protection works differently. It pays a lump sum equal to the amount of your original pension fund that has not yet been paid out to you as income. If you paid in a certain sum and had received considerably less than that by the time you died, the balance is returned. You choose what percentage to protect.
Each of these reduces your starting income to some degree. That is the consistent theme of every annuity option: every protection you add is paid for out of the income you receive.
A change worth knowing about
From 6 April 2027, the inheritance tax treatment of pensions and pension death benefits is due to change, and the options above are not all treated the same way. Broadly, ongoing income continuing to a survivor under a joint life, dependants’ or nominees’ annuity is expected to fall outside the estate for inheritance tax. Guarantee periods and value protection are expected to remain within it.
We mention this as information rather than as a recommendation: the rules are still being finalised, the treatment depends entirely on your own circumstances, and inheritance tax should never be the only reason to choose one annuity option over another. If it is a consideration for you, it is worth taking proper advice before you decide, our inheritance tax and estate planning service is provided on a fully advised basis.
A few things worth knowing before you decide
Your partner’s age and health matter too. On a joint life annuity, the provider is pricing for both lives, so their details affect the rate you are offered, which also means their health conditions could improve your terms, just as yours can.
Have the conversation together. This decision is frequently made by whoever holds the pension, alone, on a phone call. It affects both of you and both of you should be in it.
The default is not always what you would choose. If you simply accept your existing provider’s standard offer without specifying, you may end up with a single life, level annuity with no guarantee period, the highest headline income and the least protection. That is fine if it is what you want. It is a serious problem if you did not realise.
Shopping around matters more once options are involved. Providers price joint life, escalation and guarantee periods quite differently from one another, so the gap between the best and worst offer can widen considerably once you move beyond the simplest product.
Getting it right first time
Our free comparison service searches the whole of the annuity market and prices the options you actually want, joint life at the percentage you choose, guarantee periods, value protection, escalation, including any enhancement your health or lifestyle may qualify you for. It takes about five minutes, costs nothing, and the decision is entirely yours.
An annuity will not be right for everyone, and free impartial guidance on all your retirement options is available from MoneyHelper. You may also want to read our guide to how annuity rates are set.
This article is for general information only and does not constitute advice. An annuity cannot normally be changed or cancelled once set up, and will not be right for everyone. The income offered depends on your individual circumstances, the options selected and the provider. Adding options such as a joint life pension, guarantee period, value protection or escalation will reduce your starting income. Enhanced rates depend on individual health and lifestyle and not everyone will qualify. We will not provide advice or recommendations as part of our non-advised annuity comparison service; the decision is always yours. Tax treatment depends on your individual circumstances and may change; the rules on the inheritance tax treatment of pensions and pension death benefits are due to change from 6 April 2027 and remain subject to final legislation and guidance. Free impartial guidance is available from MoneyHelper. Retirement Professionals Ltd is an appointed representative of pi financial ltd, authorised and regulated by the Financial Conduct Authority. FCA number 622943.