Annuity

markbe

Good morning all.
I am going the annuity route, as my pension gar's are of great benefit.
However I was horrified to find that if I add my wife [13 years younger than me], at 50% of my pension, my annuity reduces by 31%...[No other changes].
Is this normal?
Mb.
I should add this pension is with Aviva.

markbe

Thanks Coastline.
These do not relate to my question.
If for instance you use the 'Aviva annuity calculator', you end up 17.5% down.
Regards Mb.

kidmugsy

markbe wrote: »

I am going the annuity route, as my pension gar's are of great benefit.
However I was horrified to find that if I add my wife [13 years younger than me], at 50% of my pension, my annuity reduces by 31%...[No other changes].
Is this normal?
Mb.

What do the T&Cs say on the subject?

Malthusian

Yes, this is very common for GARs. Only you benefit from a guaranteed rate - the rate they give you is based on rates back when you took out the policy. If you add your wife, they will base her rate on current rates - which as you probably know are very much worse.

In addition, the likelihood is that your wife will outlive you, so if you ask them to insure both of you, your guaranteed rate almost becomes an irrelevance.

You should consider taking the annuity on the original terms and providing for your wife some other way.

woolly_wombat

markbe wrote: »

Good morning all.
I am going the annuity route, as my pension gar's are of great benefit.
However I was horrified to find that if I add my wife [13 years younger than me], at 50% of my pension, my annuity reduces by 31%...[No other changes].
Is this normal?
Mb.

Could be one of the following reasons:

1. The GAR is not applicable when provision is made for partner
2. Large age gap makes provision for partner expensive

Perhaps best to ask your pension provider?

dunstonh

The GAR is normally set at a base level. Typically single life, level basis with a 5 year guarantee. When you start changing the terms (such as indexation or spouse) then the base figure is adjusted to reflect the extra amounts that would be paid out.

markbe

Yes found that;
Add 2.5% per year for inflation, the pension drops down so much it takes over 13 years to
increase to the original pension amount, then to equal what the original pension would pay out... 22+ years!


Thank you all for your answers.


Mb

Linton

You may find that although a spouse pension is very expensive there are cheaper things that will help. In particular increasing the guarantee period from 5 to 10 years had a comparatively small effect on my GAR pension but the result of reducing the need to consider spouse support by 5 years was very worthwhile.

xylophone

What is your/your wife's situation with regard to state pension?

https://www.gov.uk/state-pension/overview

Does your wife have any pension provision of her own?

markbe

Hi Linton,
Yes looked at 10 guarantee, it is reasonable.


Hi Xylo,
wife is fully paid up for state pension all under control with my accountant.
No she does not have her own pension.


Mb

kidmugsy

If you take the big annuity you could then help provide for your wife by (i) taking out some life insurance, (ii) contributing to a pension for her.