Choosing retirement options

A husband and wife are about to retire. They both have personal pension plans and are going to convert their funds into income after taking tax free cash by buying an annuity.

So far so simple.

Both are in good health and non smokers. He is older than his wife by four years.

So the question is should they make provision in their annuities for a survivors benefit in the event of either of them dying?

Statistically she is likely to outlive him so we might conclude that including a survivors benefit in her annuity is pretty much wasted. It might make more sense to add a survivors benefit to his annuity purchase but having crunched the numbers she wouldn’t really need more income in the event of his death.

But there is difference between need and want.

In buying the annuity many people feel that they are gifting a significant amount of capital to an insurance company. They will want to hedge all of their bets and include survivors benefits and guarantees even if they don’t actually need them.

That’s the problem with choices they force you to have to think.