What is an annuity?

A pension annuity is an insurance policy that you can buy with some, or all, of your pension savings. It will provide you with a regular, guaranteed income.

There are different types of annuities available which provide different levels of income. It's important to consider your personal circumstances when choosing an annuity to make sure it’s right for you.

Knowing how much money you have to spend in retirement can help you prepare for your future.

The most common type of pension related annuity is a lifetime annuity. This provides you with the security of a guaranteed income for the rest of your life.

Once you have bought an annuity you can’t change your mind. It’s important to research your options and shop around for a product that suits your needs.

What is the difference between a single annuity and a joint life annuity?

If you have a spouse or partner, one of the key decisions you’ll need to consider is whether to apply for a single life annuity or a joint life annuity.

Both options provide a guaranteed income for life but work differently. The main differences are:

  • Single life annuity
    Cover for: One life.
    What is it? A regular income for life.
    When will the annuity end? Upon your death.

  • Joint life annuity
    Cover for: Two lives.
    What is it? A regular income for your life. But a proportion will continue to be paid to a named spouse or partner following your death. A partner can be a registered civil partner or financially dependent partner.
    When will the annuity end? Upon the death of both you and your named spouse, or partner.

Your personal and financial circumstances will influence the annuity rate you can receive. It’s important to understand the differences in products and factor this into your decision.

For example, illness or other health considerations that contribute towards your reduced life expectancy could see you receive a higher income from your annuity.

Purchasing a joint life annuity would allow your chosen spouse or partner to continue to receive a proportion of your annuity income after your death. If they die before you, nothing is paid out after your death. This is an extra benefit that would see them receive this income for the rest of their life.

What is a single life annuity?

A single life annuity provides you with a regular, guaranteed income until your death. The policy then ends.

It could be a suitable option for those without a spouse or partner. Or for those who have a partner with enough pension savings of their own or a shorter life expectancy.

It may appeal to those who need, or prefer, the certainty of a guaranteed retirement income from their pension savings.

It may not be suitable for those who seek more flexibility around how much they take as income. Or those who want to have future access to all of their pension funds.

What is a joint life annuity?

A joint life annuity provides you with a guaranteed income for life. It is like a single life annuity. But with an extra benefit for your surviving named spouse or partner if you die before them. They will receive an income for the rest of their life. A partner can be a registered civil partner or financially dependent partner.

The income paid to the second annuitant will be a proportion of the income you were receiving before your death. You decide what this proportion will be at the point of buying your joint life annuity. The higher the proportion you set, the lower your retirement income will be.

A joint life annuity may be suitable for those who wish to provide a regular income to a financially dependent partner or spouse in the event of their death. It can help support them in the event they are without their own pension arrangements. Or if these will not cover their long-term financial needs. The initial income will usually be lower if you chose a joint life annuity.

What happens to my single life annuity when I die?

If you choose a single life annuity, the policy will likely end upon your death.

But, there are extra options you may wish to consider, such as value protection or a guarantee period. These features may allow a lump sum, or ongoing income for a period of time, to be paid to your beneficiaries or estate following your death.

The clear distinction here is that a joint life annuity would see your chosen spouse or partner continue to receive a regular income for life.

What happens to my joint life annuity when I die?

On your death, a joint life annuity would see income continue to your named surviving spouse or partner. You supply details of your spouse, civil partner or financially dependent partner when setting up your plan. The income would be a proportion of the income you were receiving before your death.

This proportion is a percentage figure, selected by you when purchasing the annuity. You can set this as high as 100% or any percentage you wish. But this will impact the income you receive.

With Annuity Ready, you can compare and edit quotes to view different percentages. This will allow you to see how annuity rates change depending on the scenarios you select.

You can also add additional benefits and options, such as value protection or a guarantee period. Adding death benefits to your annuity will impact the amount of income you receive. Keep in mind that when selecting a joint life annuity as well as value protection, the percentages available for both will be affected.

Seeking advice on single and joint life annuities

Planning your financial future and deciding on how to best use your pension funds can be a daunting task. Some people may wish to seek advice on buying an annuity first or undertake further research.

You can get free guidance at retirement via Pension Wise, a government service from MoneyHelper. This is via a phone call or face-to-face appointment. It provides you with free, impartial guidance. It is available to anyone aged 50 or over with a defined pension contribution. This is a single appointment only.

If you need further help, you may wish to get in touch with an independent financial adviser. You can find a local financial adviser using the Retirement Adviser Directory on the MoneyHelper website.

0800 011 3797

Annuity Ready allows you to compare annuity rates from all providers on the open market. We offer comparison for both single and joint life annuity rates. You have the flexibility to adjust your quotes by adding/excluding extra benefits. And adjusting the percentage of income left to your spouse or partner after your death.

Compare annuity rates: Single and joint life annuities

If you have made the decision to buy a single or joint life annuity. We encourage you to shop around to find an annuity rate that meets your requirements.

Annuity Ready is a comparison service. We can help you compare quotes across the whole of the market. This includes Aviva, Canada Life, JUST, Legal & General, Scottish Widows and Standard Life.

Enter your details once and we’ll search the open market. You can see if we can find you a higher income than your current pension provider. You can even adjust and tailor the quote online to view different rates based on your requirements.