Millions of over 40s at risk of being left penniless after partners’ death
More than half of couples over the age of 40 are at risk of leaving one partner penniless in retirement in the event that the other one dies because they have failed to sort their financial affairs.
Some 53% of couples surveyed by Prudential said they had not made pension, will, or life insurance arrangements to ensure one of them will still get a retirement income after the other dies, the Daily Mail reports.
Women are particularly at risk, as one in five admitted they will be solely reliant on their partner’s income in retirement, meaning they could be left with nothing unless they take steps to ensure they’re taken care of should their husband die.
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 outlive their partner.’
People with money purchase pension schemes see them converted into incomes when they come to retire, this can either be by purchasing an annuity, or taking out an income drawdown product.
But there have been multiple examples of people reaching retirement and taking out a single life annuity, which pays out an income for the lifetime of the pension-holder only, not fully aware that it will not continue paying out to their spouse once they die. Taking out a joint life policy would ensure some form of payment would continue, while income drawdown plans will also pay out death benefits.
The plight of many married pensioners who unwittingly took out single life policies highlights the importance of taking financial advice when approaching retirement. Smith-Hughes said: ‘Having open and frequent conversations as a couple 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.’
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Author – Laura Miller