Pensions death risk for unprepared couples
More than half of UK adults aged 40-plus and who are not yet retired are at risk of losing all or part of their private pension income if one partner dies because they are failing to make any pension provision for each other, new research from Prudential shows.
The study reveals 39 per cent of couples do not have arrangements in place to ensure that pension income continues to be paid after the death of one partner, and another 13 per cent do not know what will happen to their pension income and other investments if their partner dies.
Only 48 per cent have made arrangements to ensure that pension income will continue to be paid and it is men who are more likely than women to have made sure that happens. The study found 56 per cent of men have put arrangements in place compared with 43 per cent of women.
Prudential has launched an online guide for couples at pru.co.uk/couplesconversations which provides a decade by decade countdown on the financial issues they may need to tackle.
Vince Smith-Hughes, head of pensions development at Prudential, said: "Talking about money can be difficult enough for many couples but clearly talking about death and money is a step too far for millions.
"But it's time to speak up if more than half of all working couples aged 40-plus do not have arrangements in place to ensure pension income will continue after the death of one of them. Losing some or all of your income in retirement is a terrible risk to take and couples should think carefully about what happens in the event of one partner's death, and seek advice where appropriate to ensure this eventuality is taken into account."
Arrangements for a spouse or partner
Vince Smith-Hughes adds: "You can choose a joint life annuity which will pay an income to a spouse or dependent after your death and alternatively or as well as you can purchase a guarantee that the income will continue for a set period up to 10 years after the death of an annuitant.
"For those still not yet retired it is also worth ensuring that whoever administers your pension scheme has written instructions to ensure the wishes of the member for disbursement of the pension fund upon death are known."
60 per cent of couples not talking
But Prudential's research shows just 31 per cent of non-retired UK adults aged 40-plus have discussed with their partners what happens to pensions and other assets in the event of one of them dying.
And only 4 per cent have talked with their partners about the difference between joint life and single life annuities - which stop paying when the purchaser dies - and joint life annuities which continue to pay after the death of one partner.
Gemma Goodman, of independent financial advisers The Annuity Bureau, said: "It's vitally important that couples understand what their annuity options are, particularly what sort of income it will pay and whether it pays a single life or joint life income. I'd also suggest people seek help when making a decision about what sort of annuity to buy. We know that a lot of women have smaller pension pots than men and so it may well be that one option for a man is to buy a joint life annuity which continues to pay an income to his wife or partner on his death.
"Equally, men and women should find out about enhanced annuities which pay a higher income to people who have certain health issues. All of this underlines the importance of shopping around for the most suitable annuity for individuals and couples, rather than simply choosing the highest rate on offer."
Free online guide
Prudential's online guide at pru.co.uk/couplesconversations covers topics such as making a will, discussing pensions and how much to save, talking about when to retire, working out retirement income, reviewing total savings, researching annuity options and when to buy, checking National Insurance contributions, talking about housing options, leaving an inheritance, and agreeing on long term care.
Wealthier couples plan better
Wealthier couples are more likely to have discussed financial planning in the event of one partner's death. Around 62 per cent of couples with a household income of £50,000-plus have arrangements in place to ensure pensions continue to be paid, compared to 43 per cent of couples in households where the total income is less than £50,000 a year.
North East has greatest number with no death benefits
When asked whether they and their spouse/partner had made any financial arrangements to ensure about they continue to receive an income from their pension and other money after their death, seven in 10 people in the North East said no such arrangements or didn't know.