Women are still far more likely to outlive their husbands but many face a financial shock when their partner dies as all too often most of the pension is in the man’s name. Married couples, civil partners and cohabitees all need to plan ahead to make sure their retirement income doesn’t die along with him.
At 50, the average man has pension totalling £84,205, but this falls to just £39,654 for women, less than half as much.
One in three women have less than £5,000 in their pension pot, according to Legal & General. Women are also more likely to have no idea of the size of their pension.
When it comes to pension planning, ignorance isn’t bliss. Far from it.
Many widows are forced to downsize and work later in life to make ends meet. Others are too old or unwell to take such drastic steps and struggle.
The pensions gender gap can cause huge problems unless couples plan ahead to make sure the bulk of their pension income will survive if the husband dies first.
Retirement specialist Just Group has analysed official figures and found there are 1.1 million widows aged 80 and above in England and Wales, compared to just 259,000 widowers.
Widows outnumber widowers by more than four-to-one, and Just’s group communications director Stephen Lowe said this shows the importance of couples making joint financial plans for later life.
“Women are far more likely to be left worse off in retirement when their partner dies unless the couple takes steps to protect them.”
The first step is to make sure any pension will continue to pay income to the surviving partner. “This is particularly valuable where one partner has significantly more wealth or income than the other.”
Lowe said as a benchmark, a retired single person needs around 70 percent of the income of a couple to maintain the same standard of living, according to the Pensions and Lifetime Savings Association.
Couples must take particular care when buying a lifetime annuity, whose popularity has recovered as they now offer a far better return than before.
Andrew Tully, technical services director at Nucleus Financial, said as annuity rates climb and more couples buy them, they need to take their partner into account when deciding what type of policy to buy.
Single life annuities pay slightly more income at first, figures from Hargreaves Lansdown show.
A 65-year-old man buying a level single life annuity with a £100,000 pension pot would get income of £7,165. However, the income stops the moment he dies.
If he bought a joint life annuity instead, the couple would get a lower income of £6,636 a year. However, if the man dies first the policy would continue to pay 50 percent of that to his wife, giving her £3,318 a year.
Tully said if a wife or partner has little or no private pension of her own, a joint life annuity makes more sense.
As ever when buying an annuity, shop around and check rates and terms, he added. “Annuities may offer other benefits, such as paying a lump sum to any family member if the policyholder dies first.”
READ MORE: Retirees flock to buy annuities as sales hit highest level since 2014
The majority of pensioners now opt for drawdown at retirement. This involves leaving their money invested in the stock market so that it continues to grow, while taking income as required.
Drawdown pots can be passed on after death but Tully said couples should ensure the right person stands to benefit. “Make sure expression of wish or nomination forms are completed and kept up to date.”
Also, make sure all vital documents such as a will and Lasting Power of Attorney are up to date and both partners know where to find them.
Keep log-in details for bank accounts, savings and investments in a safe but accessible place, to ensure nothing gets lost.
If you are married or in a civil partnership and both partners reached retirement age before April 6, 2016, the survivor may get a higher basic state pension based on their partner’s National Insurance record.
This does not apply if they have built up a full basic state pension from their own NI contributions.
Nobody wants to think about dying, but couples can’t afford to stick their heads in the sand as the consequences of doing nothing can be dire.
