More than half of couples over 40 have not made plans for their spouse’s retirement income should they die

1st November 2013

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Fewer than half or 46 per cent of couples over the age of 40 in the UK have made arrangements to ensure that one partner will continue to receive a retirement income after the other dies, according to new research from Prudential.

Women over 40 are most at risk with more than one in five or 21 per cent currently planning to depend entirely on their other half for a retirement income, compared with just five per cent of men over 40. Overall, in 13 per cent of over-40s couples one partner (male or female) will be entirely reliant on the other’s pension to provide an income in retirement.

The Prudential study found that 53 per cent of couples aged over 40 have made no arrangements to ensure that when one partner dies, their pension will continue to pay an income to the surviving partner. More than a quarter (28 per cent) of couples have yet to discuss the impact on pension arrangements of one partner’s death, while 19 per cent have at least made a will but no other financial plans.

The retirement risks faced by many couples are further highlighted by the fact that 41 per cent admit they have never discussed how they will turn their pension savings into an income in retirement. A further 19 per cent have discussed it but couldn’t agree on the best option, and less than a third (30 per cent) of couples have reached a decision on the best retirement income option. However, only 10 per cent plan to purchase a ‘joint life’ annuity – where a surviving spouse, partner or dependant will continue to receive an income after the annuitant dies.

There is also significant confusion among couples about the sources of their retirement income. One in seven (14 per cent) don’t know what their main source of income will be when they stop working – however men are more certain as only nine per cent said “don’t know” compared with 18 per cent of women.

Vince Smith-Hughes, retirement expert at Prudential, said: “For couples looking to enjoy a comfortable retirement, organising and agreeing their income options should be a priority –long-term financial planning can be even more important than managing day-to-day-finances.

“Our research shows that even those couples who have discussed their retirement finances have still made decisions that could leave one of them without an income if they outlived their partner.

“Having open and frequent conversations as a couple about your retirement planning is definitely an important first step. However, making the right decisions on the best retirement income options – including what happens when one partner dies – can be daunting. That’s why seeking advice from a retirement specialist or financial adviser is just as important. There is also plenty of free information available from independent organisations such as the Money Advice Service and The Pensions Advisory Service.”

 

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