Annuity in advance or in arrears?

pow_2

Hello,

I have a question regarding annuity payments.

Sadly my husband passed away recently and his annuities stopped with his death. Can anyone explain to me the difference between a pension company paying an annuity in advance or in arrears?

What turned out to be the final annuity payment was deposited in our bank on the 22nd of December and he died on the 28th of December.

I have recently come across his policy information which states the annuity was paid "in arrears". Shouldn't the final payment have been made on the 22nd January?

Thank you for any help you can offer.

Pat

dunstonh

Can anyone explain to me the difference between a pension company paying an annuity in advance or in arrears?

Say the funds were invested in the annuity on 1st March. In advance means the first monthly annuity payment would be made on 1st March for the month ahead. In arrears would see the first annuity payment made on 31st March for the month just gone.

pow_2

dunstonh wrote: »

Say the funds were invested in the annuity on 1st March. In advance means the first monthly annuity payment would be made on 1st March for the month ahead. In arrears would see the first annuity payment made on 31st March for the month just gone.

Sorry if I'm being a little dense with this.

Given his payments were in arrears and he was still alive in December shouldn't he have been due the January payment? Or at least payment from the 23rd to the day of his death?

dunstonh

Was the annuity with or without proportion? That is the thing that decides how much you should or shouldnt be paid in the event of death.

pow_2

dunstonh wrote: »

Was the annuity with or without proportion? That is the thing that decides how much you should or shouldnt be paid in the event of death.

I've looked at all the paperwork I can find but there is no mention of whether the annuity was with or without proportion. I'd have thought that information would have been quite prominent, perhaps I'm not looking in the right place.

dunstonh

If its with proportion, you get the money for the interim period between last payment and death. If its without proportion, you dont.

Its one of the options you look at when doing an open market option with an IFA but if you dont use an IFA, its rarely mentioned and you get the default option from that provider.

Debt_Free_Chick

I think we need to know the due date of the instalments. It could be that the payment made on 22nd December was the December instalment, but it was paid early in view of Christmas.

Or it could be that instalments were due on 22nd day of each month - so the December instalment would cover the period from 23 November to 22 December. In that case, he would not be entitled to a payment on 22 January as that would have covered the period from 23 December to 22 January.

He would only have been entitled to a payment for the period from 22 December to 28 December if, as Dunstonh states, the annuity was one "with proportion".