Breadwinners increasingly failing to think about pension provision for their spouse

5th September 2016

An increasing number of younger couples are not making any provision for pension payments to continue to their partners in the event of their death according to research by pension firm Aegon.

The majority (75%) of people aged 75 and over have made pension provisions for a spouse, but this falls to only 47% of those aged 45 to 54, suggesting a generational shift away from such provision.

While, the workplace pension reforms – known as automatic enrolment – will over time mean more individuals have a pension in their own right, 25% of those surveyed said that their spouse had no pension of their own, begging the question of how their partners would get by financially if the worst happened.

These findings coupled with the recent changes to state pension rules, which mean state pension payments no longer continue to a surviving spouse, highlight the risk of a shortfall in retirement income for the bereaved that is likely to grow in the years ahead if couples don’t plan their retirement finances together.

Kate Smith, head of pensions at Aegon said: “The fact that the majority of those above age 75 have pension provisions for a spouse is probably down to common practice in defined benefit schemes, meaning this generation didn’t have to make a conscious decision.

“Historically, company defined benefit and state pension payments would continue to a partner on the death of the individual. However, with the shift away from defined benefit and with changes to state pensions meaning a partner will no longer receive a survivor pension, these findings suggesting younger and future generations of retirees are less likely to provide for their spouse are worrying.

“The current generation of defined contribution savers have to plan their pensions together more than previous generations. In some cases, each partner will be building up their own pension and this trend is likely to increase as automatic enrolment brings millions more into workplace pensions. However, for some, their workplace pension will be very modest and self-employed or non-working spouses won’t benefit in this way.

“As a couple your finances become intertwined from an early stage – joint bank accounts and joint mortgages form the basis of many “financial” partnerships. But for those planning to grow old together, it’s important to consider the adequacy of retirement income for both partners including the financial consequences when one of you dies.

“The closer you get to retirement the more you need to begin to plan your retirement finances in tandem. One of the main benefits of reviewing your retirement plans as a couple, is to ensure that should something happen to you, your partner will be provided for and won’t end up reliant on a less than generous state pension.

“This is traditionally more of a problem for women who on average live longer and may have been more reliant on a husband for pension income or who have been unable to build up an adequate pension for themselves due to time out to care for children or elderly relatives. While these societal trends may change over time, it’s important that couples begin planning retirement finances together rather than in isolation.”

Things to consider: Consider the impact of your financial choices on your partner.

o    If you want to buy an annuity, think about buying a joint life annuity so that payments continue in the event of you dying.

o    Drawdown might provide you with a more flexible option. In drawdown partners can inherit unused funds.

o    If you have a defined benefits pension scheme, check you have a spouse’s pension.


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