Getting married when in receipt of an annuity

John_Gray

Could someone say whether it is possible to vary the terms of a pension-annuity-in-payment upon subsequent marriage, assuming it was written as a 'single life', so that the surviving spouse gets a proportion of the monthly payments? Or is everything utterly and entirely fixed?

Alternatively, if the possibility of marriage is present at the time of taking the annuity, can things be written so that in the event of subsequent marriage the surviving spouse gets part of the payments?

Come to that, it it possible for any arbitrary person to be able to receive part of the annuity in the event of the death of the annuitant, if it has been set up properly?

Thanks! (Apologies if any of the jargon is incorrect or misused...)

Dark_Pariah

It is my understanding that a true annuity is fixed. Once it is set up on a single life basis, thats it- it cannot be changed.

There is such a thing as n unsecured pension, which is like an annuity, however, it does allow you a little bit more flexibility and so you can change future payments to include a joint life element.

I would argue that an annuity is just a specialist contract. If you wanted an income to be paid to someone in the event of your death, even if they are not related to you (or your partner), that is part of the terms of the agreement.

If you want a institution to receive an income in the event of your death, the Perpetuity rules may come into play - the Law does not like a debt to be paid for ever to a legal entity - there is specialist legislation for pension schemes etc, which specifically avoids these rules. Therefore I imagine that if you were to set up a policy which is payable to XYZ Ltd in the event of your death it would be void. The only exception I can think of is charities - I am prepared to stand corrected, however, I would think that if you were to set up a policy for a well know charity (eg Battersea Dogs' Home) , the Courts may well decline to use the perpetuity rules. From a commercial point of view, the resultant income from such a policy (including your income) would probably be very small - to account for the fact that they would be paying for a very long time - assuming you could get an insurance company to give you a quote.

dunstonh

Assuming it is a lifetime annuity (from a personal pension) then these are cast in stone once set up and cannot be varied (a few exceptional cases can exist). If circumstances are possible to liable to change in the short term then income drawdown may be more attractive until you know whether you need sole/joint provision

margaretclare

Just to add to this: my DH bought an annuity in the early 1980s. It has no 'widow's pension' built into it; when he dies, it dies with him. End of.

This came into prominence when his second divorce was being bitterly fought through. Wifey tried hard to claim that she had a share in it: she didn't.

He has since married me, and the same applies. It stands as it did when it was originally set up - when he dies, so does the annuity.

HTH

EdInvestor

The exception is an annuity purchased with money classed as "protected rights" - ie the NI rebates paid to a private pension where someone is contracted out of the state second pension.

At present the rules on PR pensions require a single person to by an annuity with a 50% spouse's pension, even if they are not married, have never been married and have no plans to get married.

This ludicrous rule, which transfers a chunk of single retirees' pension savings to a life insurance company, amounts virtually to legalised theft and is well overdue for repeal IMHO.

As far as the OP is concerned, if he wants to make provision for his spouse after his death he should save/invest the relevant portion of the current annuity income (which he wouldn't be receiving if he had bought a joint life annuity) in an ISA in her name.

bigbloke45

What's happened to the good old "whole of life" assurance policy?

Provided the annuitant is in good health then he/she could effect a whole of life plan to pay out on their death. As a guide, the premium could be equal to the income from the annuity that would have been forgone if a joint life annuity had been chosen at the outset.

An income could be derived from the life assurance payout and would not be as restrictive as a spouses annuity e.g. it wouldn't die with her/him, the capital is always available. In the event of the spouse dying first, there is the option to surrender the whole of life and continue with the original annuity as a single life or, in the event of remarriage....

Dark_Pariah

EdInvestor wrote: »

The exception is an annuity purchased with money classed as "protected rights" - ie the NI rebates paid to a private pension where someone is contracted out of the state second pension.

At present the rules on PR pensions require a single person to by an annuity with a 50% spouse's pension, even if they are not married, have never been married and have no plans to get married.

Forgive me if I am wrong EdInvestor, but I think that rules have changed in this regard. If you are single at the date you buy an annuity, your Protected Rights can be used as part of your tax free cash and the remainder used to provide a single life annuity. If you subsequently marry, then because it is a single life annuity, then unfortunately for your spouse, the annuity dies with you. If you are married at the date of retirement, your annuity must contain terms which mean that your protected rights provide a spouses element. I am, as ever, probably misguided and more than prepared to be corrected.:idea:

EdInvestor

Dark_Pariah wrote: »

Forgive me if I am wrong EdInvestor, but I think that rules have changed in this regard.

Hope you're right, but hadn't heard of it - an opportunity may arise with the October decision expected on PR in SIPPs.

If you are single at the date you buy an annuity, your Protected Rights can be used as part of your tax free cash and the remainder used to provide a single life annuity.

Ok, I can see that might work, but it wouldn't affect a fund which was wholly PR, presumably?

Dark_Pariah

[/quote] Ok, I can see that might work, but it wouldn't affect a fund which was wholly PR, presumably?[/quote]

No, you are right EdInvestor. I need to explain myself more clearly.

It is my understanding that recent changes have meant that up to 25% of the Protected Rights fund can be used in the Pension Commencement Lump Sum (PCLS).


The rest must be used to provide an annuity [which if the member is married at the date the annuity is provided must include a joint life element].

:think: I seem to recall that wiser heads than I said that it is often for this reason that in pension withdrawal policies, a cluster is made up entirely of Protected Rights, which are held back until the client/member is aged 60, as it allows a married individual to take a series of single life annuities until that date. Once they have reached 60, they use the PR cluster to provide the joint life annuity. From then on (as with all other pension withdrawal clusters) the individual can choose either single life or joint life annuities from the remaining clusters as and when they are needed.

EdInvestor

The rules now say that you can take benefits from PR funds on the same basis as non-PR, ie at age 50 and with 25% TFC.However there must still be a 50% spouse's pension in any annuity purchased. This does not apply to drawdown income..

As of October PR money should be transferable to SIPPs for drawdown, but the DWP has not dropped the 50% spouse annuity rule AFAIK, much to the irritation of the providers who will have to keep the monies seaparated..Of course if you can put the PR pension into drawdown and then ASP the rules on annuities don't really matter.