Joint or single annuities?

If you've decided to buy an annuity, one of your first considerations will be whether to go for a joint or a single annuity.

What is a single annuity?

As the name suggests, a single annuity is a product that provides an income for just one person. When you die, the income will cease and your partner, if you have one, won't receive any further payments.

Who are single annuities for?

If you don't need an income to continue to be paid to a partner or dependent after you die, perhaps because they already have an annuity or have decided to arrange one, then a single annuity may be suitable.

What is a joint annuity?

A joint annuity is set up for two people and pays out an income until both of you die. When the first partner dies, a percentage of your income will be paid out to the other partner either for a pre-agreed fixed period or until the end of their life.

You decide what percentage of your initial income you want to continue after the first death. For example, the surviving partner could receive 100%, 50% or 75% of the joint income you received while you were both alive. Remember that the higher this percentage is, the lower your income will be to begin with.

Who are joint annuities for?

If you want an income to continue to be paid to a partner or a dependent after you die, then a joint annuity may be suitable.

A joint annuity is not the only way for your partner to receive an income after you die. It is an option to set up two single annuities.

Choosing between single and joint annuities

Just like it's sometimes cheaper to buy two single rail tickets instead of a return, joint and single annuities can differ in the value for money on offer. If you're buying an annuity with a partner who has their own pension pot, you should get comparable quotes for both a joint annuity, and two separate single annuities.

  • If your partner has a much smaller pension pot, or no pension savings at all, a joint annuity is one way to provide them with an income until the end of their life.
  • Because it is likely that a provider will have to pay out for longer when you purchase a joint annuity, the rate you are offered will usually be lower than with a single annuity.
  • The rate will depend on your partner's age, life expectancy and health, as well as your own.
  • You don't have to take the annuity offered to you by your pension provider – shopping around could get you a better rate.

How much income will I get?

Single life annuities typically tend to offer a better rate (level of income) than joint annuities, as the provider only needs to pay out until the end of one life. The more you can pay upfront, the higher your retirement income will be. Providers will calculate your annuity rate based on a number of things, such as your age and health. If you have a medical condition or make certain lifestyle choices such as smoking, you may be able to get a better rate through an enhanced or impaired annuity.

However, if you have a partner who is dependent on you financially and you want them to continue to receive an income after you pass away, you may want to consider a joint annuity.

What are my other options?

Annuities used to be the only feasible retirement income option for many people, but this is no longer the case. Since April 2015, there has been more flexibility in the pensions system, opening up new options for lots of retirees with pension savings.

Read our guide to find out about the alternatives to buying an annuity.

Because decisions about retirement are so important, you may also want to seek financial advice tailored to your circumstances if you're not sure about the option best suited to you.

Last updated: 31 May 2015