Annuity Cash Outs

I found this on money.telegraph:

Married people are far more likely to buy an annuity that provides an income for their spouse when they die if they get independent advice, according to new figures from pension companies.
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Shop around: make sure your annuity fits snugly with your needs

The revelation comes just days after Age Concern called for radical changes to the way annuities are sold because “selfish” husbands leave their wives hard up when they die by buying single-life annuities.

Age Concern points to figures from Standard Life that showed three quarters of all the pension annuities it is paying to married people, most of whom are men, provide no income for a widow. The charity is calling for a system that demands written consent from a married partner when an individual chooses a retirement income which does not have a widow or widower’s benefit.

But new data from annuity specialist Prudential shows that 45 per cent of its customers take a pension income with no widow or widower benefit when they do not get advice, but this figure rises to 55 per cent among those who shop around for the best rate with the help of an independent financial adviser. Some 74 per cent of all 60 to 65-year olds, the typical age when a pension is converted to an annuity, are married.

Pensions experts say the problem of husbands leaving their wives in the lurch is being exacerbated by poor information from pension companies - and a confusing system.

Almost 60 per cent of people converting their pension pot into an income stay with their existing pension provider rather than shop around for the best rate. By doing so, they could be missing out on up to 30 per cent more income for life and risk being pushed into deals that are not suitable for them or their spouses, say annuity experts.

For example, Audrey Dodson, a 67-year-old Sunday Telegraph reader, claims a Prudential agent made no mention of an option with a widow’s benefit when talking to her husband about buying an annuity, even though she was sitting in the room. “At no point did the agent ever mention a smaller pension paying out on the second death,” she says. “In many cases it is the insurance companies not explaining the issues properly, so don’t blame selfish men.”

The majority of pensions with no spouse benefit were taken out several decades ago. Indeed, Age Concern accepts that the situation is better than it was, but says a problem remains.

The Association of British Insurers says the decision on whether to buy a single life or joint life annuity is not always clear cut and it is an individual choice.

Helen McCarthy, the head of pensions and savings development, says people tend to choose the annuity that pays most in the early years. “People tend to go for the highest starting income so they can enjoy it while they are more active, and for couple that will always be one with no spouse benefit. It is an individual choice and not for us to tell people what they should do. And women increasingly have their own pension, so there are cases where each partner takes out a single life annuity of their own and they are both covered.”

Each couple is in a different situation and what is right for some will not be right for others says Billy Burrows, director of William Burrows Annuities. “In some cases you will find the wife has an inheritance from her parents or her own property somewhere else, so she is well provided for,” he says.