What happens to my annuity if I die early on?

An annuity is a policy, bought with the proceeds of your pension fund savings, which pays you an income in retirement until you die. Usually you can choose the frequency of the payments, which can be monthly, quarterly, 6 monthly or annually.

If you die without purchasing any of the available annuity options then your annuity payments will cease.

What are the options?

You can choose a guarantee period which can protect your income if you die early. Normally the choices from annuity providers are a 5 or 10 year guarantee period, however, some will let you choose any number of years up to a maximum of 10 years.

How does the guarantee work?

For example, if you chose a 10 year guarantee period and died after 5 years and 3 months, the annuity provider would continue to pay your annuity income in full for the remainder of the guarantee period; in this example for another 4 years and 9 months. The annuity provider would pay the money either to your:

Named dependant's as a regular income ' if you have a dependants annuity, or
to your estate as an equivalent lump sum if you die before age 75. The lump sum is subject to deduction of tax which is currently at the rate of 35%.

If you die after age 75, then any payments due will be paid as a regular income. If you don't choose this guarantee your income will stop when you die, even if this happens in the early years.

Can my annuity revert to my partner after I die?

Yes, you can normally specify a financial dependent when you purchase your annuity. Annuity providers normally allow the following: Husband, wife, civil partner or life partner (living together as if married or civil partners and financially dependent on you or in a mutually dependant financial relationship with you).

Another annuity option you can purchase is the continuing pension option. You can choose how much of your pension should continue in the event of your death to a partner; this can be up to a maximum of the pension you were receiving. Most people normally choose either half, two-thirds or all of their income. If you die first, the annuity provider will pay your named dependant an income for the rest of their life. If you have also chosen a minimum guaranteed payment period and die during that time, your dependant's income will start when payments under the guarantee stop.

What if my partner dies first?

Your income will continue as normal, but no dependant's income will be payable. Also, you won't be able to revert to a single life annuity and benefit from a higher income yourself.

What if I get divorced?

Normally your former partner will not be entitled to receive a dependant's income from this annuity after your death. Nor can you transfer the dependant's income to any new partner or receive a refund.