*Symmetrical* Joint Annuities??

Aleward

Help!  
I have a pension pot to invest in an annuity (after tax free take of 25% etc).  I know all about making it inflation linked, guaranteed income etc etc, and about providing for a loved one.  THE PROBLEM: What I want is an annuity that pays X until one of us dies, and then pays 2/3 to the survivor until they (whether it's me or my wife) dies. Try as I might, I can't find any offering, or any discussion, of what seems to me a simple proposition.  I know I can buy an annuity that pays my wife 50-67-100% after my death.  What I can't find is one that would pay ME less (50-67-100) after HER death, if she were first to go (i.e. symmetrical between us).  These exist in the US, but not a word about it in the UK.  Why?

Dazed_and_C0nfused

If she died first why wouldn't you just want your  annuity to continue as it was 🤔

DullGreyGuy

Joint annuities don't exist here, there is probably no legal reason why they don't but they don't as no one has identified there to be sufficient demand to invest the millions required to make the IT and Actuarial changes to support such a product. 

Same as joint credit cards... exist in the USA but are very rare and don't exist in the UK. 

Wonder if its due to the fact that a large volume of the annuity business comes from pensions schemes (eg DB buy-in/buy-out) and equally there are no joint pensions so no need for a corresponding joint annuity. 

DullGreyGuy

Dazed_and_C0nfused said:

If she died first why wouldn't you just want your  annuity to continue as it was 🤔

As presumably the cost of living will reduce with there only being one mouth to feed etc and potentially it could mean an increase in the monthly amount paid out given it steps down when either party dies. 

Dazed_and_C0nfused

DullGreyGuy said:

Dazed_and_C0nfused said:

If she died first why wouldn't you just want your  annuity to continue as it was 🤔

As presumably the cost of living will reduce with there only being one mouth to feed etc and potentially it could mean an increase in the monthly amount paid out given it steps down when either party dies. 

So a higher start rate for the annuity.  That's makes sense now.

OldScientist

Aleward said:

Help!  
I have a pension pot to invest in an annuity (after tax free take of 25% etc).  I know all about making it inflation linked, guaranteed income etc etc, and about providing for a loved one.  THE PROBLEM: What I want is an annuity that pays X until one of us dies, and then pays 2/3 to the survivor until they (whether it's me or my wife) dies. Try as I might, I can't find any offering, or any discussion, of what seems to me a simple proposition.  I know I can buy an annuity that pays my wife 50-67-100% after my death.  What I can't find is one that would pay ME less (50-67-100) after HER death, if she were first to go (i.e. symmetrical between us).  These exist in the US, but not a word about it in the UK.  Why?

One way round this that may or may not be possible (depending on distribution of DC funds between you) is to each buy a joint life with survivor benefits annuity. Otherwise, it is only a joint life with 100% survivor benefits that is symmetrical (which of course, would have a lower payout rate than the option you've suggested).

I didn't know these were available in the US (can you send a link?) since I have seen the two (or even three) annuity approach advocated in the past (somewhere on bogleheads, if my vague recollection serves).

As others have mentioned, the annuity market in the UK is relatively small - about 75000 contracts were sold in 2023 (e.g., see https://www.abi.org.uk/news/news-articles/2024/2/2023-sets-new-post-pension-freedoms-record-for-annuity-sales/ ), so limiting the flavours available may be a marketing choice rather than an actuarial one.

DullGreyGuy

OldScientist said:

Aleward said:

Help!  
I have a pension pot to invest in an annuity (after tax free take of 25% etc).  I know all about making it inflation linked, guaranteed income etc etc, and about providing for a loved one.  THE PROBLEM: What I want is an annuity that pays X until one of us dies, and then pays 2/3 to the survivor until they (whether it's me or my wife) dies. Try as I might, I can't find any offering, or any discussion, of what seems to me a simple proposition.  I know I can buy an annuity that pays my wife 50-67-100% after my death.  What I can't find is one that would pay ME less (50-67-100) after HER death, if she were first to go (i.e. symmetrical between us).  These exist in the US, but not a word about it in the UK.  Why?

One way round this that may or may not be possible (depending on distribution of DC funds between you) is to each buy a joint life with survivor benefits annuity. Otherwise, it is only a joint life with 100% survivor benefits that is symmetrical (which of course, would have a lower payout rate than the option you've suggested).

Yes, if you both got a standard annuity with a 1/3 2nd life benefit then that would achieve the same objective however requires identical pension pots to start with and means you'll have two sets of admin costs factored in so marginally less money (though difference in longevity assumptions between providers would make much more difference)

dunstonh

 THE PROBLEM: What I want is an annuity that pays X until one of us dies, and then pays 2/3 to the survivor until they (whether it's me or my wife) dies.

If this a lifetime annuity or a purchase life annuity?

If its a PLA then you just do one each and adjust the death benefits there.  If its a lifetime annuity then you cannot do joint because the pension belongs to the individual.   The spouse is a death benefit.

Try as I might, I can't find any offering, or any discussion, of what seems to me a simple proposition.

You could do drawdown and buy an annuity within the investment platform.  Have the income paid so it doesnt leave the platform and become taxable but then draw a flexible amount to suit the need.   It wouldn't match your objective but would give you some flexibility if you really want to sacrifice the surviving spouse.  Especially in reality, the surviving spouse isn't just going to lose 33% on your proposal but also a state pension income.

In reality, the difference in income between a 67% spouse and what you are after is so small that is completely pointless for a new product and and a change in tax rules to be cost effective fort he one person that wants it.

Aleward

To 'oldscientist':

The US term is "joint and survivor annuity" and googling that will find you lots.  E.g.: Joint and Survivor Annuity: Benefits, Disadvantages & More. (I'm new and this site prevents me posting the actual https link - but you can google that fuller phrase to find this example.  It also seems to prevent me replying direct to you because the link you sent counts as mine in my reply....)

I accept that they don't seem to exist here, but cannot for the life of me (geddit?1?!) understand why not.  If you have a fairly equal relationship with a spouse, then why wouldn't this product make sense?  The idea of protecting your spouse exists, as does the idea that your spouse might not need quite as much if she's murdered you (e.g. 50%, 67% etc).  Yet the idea that you might yourself not need quite as much after you've murdered her doesn't seem to have registered with the industry. 

Interesting what you say about the market for annuities being small.  I didn't know that/  Maybe that's the problem - but the actuarial maths is not complex, so it must by either industry torpor or some issue embedded in tax law.

Thank you to everyone

Aleward

dunstonh said:

 THE PROBLEM: What I want is an annuity that pays X until one of us dies, and then pays 2/3 to the survivor until they (whether it's me or my wife) dies.

If this a lifetime annuity or a purchase life annuity?

If its a PLA then you just do one each and adjust the death benefits there.  If its a lifetime annuity then you cannot do joint because the pension belongs to the individual.   The spouse is a death benefit.

Try as I might, I can't find any offering, or any discussion, of what seems to me a simple proposition.

You could do drawdown and buy an annuity within the investment platform.  Have the income paid so it doesnt leave the platform and become taxable but then draw a flexible amount to suit the need.   It wouldn't match your objective but would give you some flexibility if you really want to sacrifice the surviving spouse.  Especially in reality, the surviving spouse isn't just going to lose 33% on your proposal but also a state pension income.

In reality, the difference in income between a 67% spouse and what you are after is so small that is completely pointless for a new product and and a change in tax rules to be cost effective fort he one person that wants it.

The surviving spouse is (if my wife) already "sacrificed", but I'm not "sacrificed" if it's me, which is asymmetrical.  And yes I do think I'd prefer symmetry, whatever you call it.  Not sure I agree that the difference is trivial - men do tend to die sooner but the chance of being the survivor is probably 20-30%, and so the initial monthly amount would rise by percentage in the mid-high single digits.  Not to be sniffed at.

Secret2ndAccount

Purchase two annuities. Use 67% to buy an annuity with 100% survivor benefits. Use 33% to buy one with zero survivor benefits. The second part is cheaper so you get a higher overall monthly payout. If you die, you have achieved exactly what you want, and the wife is left with 67%. If she dies, you have 100%. It's pretty close. You might have to spend the extra monthly income on presents for your wife...