A joint life annuity is mostly designed for couples. Like a single life annuity, it pays you a regular, guaranteed income until you die. But when you die that income switches to someone else instead of just stopping. Some or all of it will go to your partner or a dependant as regular payments.
You can choose a joint life option when you’re setting up your annuity. It might also be called a Spouse Benefit, a dependant income or other, similar names.
If you do go for a kind of joint annuity, bear in mind that:
- You’ll get a lower annuity income from your provider. That’s because your provider will be paying out for longer if your dependant outlives you
- Other choices might also work well. For example, annuity options like value protection and guaranteed minimum payment periods
How does joint life annuity work?
You can choose a joint life option when you’re setting up your annuity. At that point you’ll decide the other person it will cover after your death. They can be a surviving husband, wife, civil partner or someone else who’s financially dependent on you.
You’ll probably also choose how much of your income goes to them. For example, if you’re buying one of our annuities directly from us, you can have 50%, 67% or 100% of your income go to your loved one after you’ve passed on.
You can’t make any changes to your annuity once you’ve set it up, so make sure you’re making the right choices for you and your loved one. And annuity rates can vary between providers, so it’s always worth shopping around before deciding on one.
Types of annuity
Want to learn more about annuities? Our article looks at different types of annuity, including lifetime, deferred and immediate needs annuities.
A joint life annuity case study
Andreas and Elena were married for thirty years before reaching later life. Elena had a successful corporate career while Andreas took on freelance illustration work and looked after the kids. Elena built up a very substantial pension while Andreas had barely any savings.
That worried Elena, so:
- When she turned 65 and retired, she put £100,000 into a joint life annuity, with 50% of its income switching to Andreas on her death
- Elena’s joint life annuity paid out £6,224 a year – if she’d set it up as a single life annuity, it would have paid out £6,547 a year
- Andreas started selling more and more paintings and often joked that he was now the family breadwinner
On its own, a guaranteed £6,224 a year isn’t enough for a couple to live off. The Retirement Living Standards recommends that a couple will need at least £22,400 in retirement. But it is enough to cover the basics, which is a big peace of mind gain. And Elena and Andreas were also able to claim the full new State Pension, which for 2024/5 is £11,502.40 a year.
What happened then? Well:
- Elena passed away at the age of 70, surrounded by family and friends, and much mourned by all
- 50% of Elena’s income switched to Andreas, leaving him with a guaranteed £3,112 a year as his loved ones helped him through bereavement and beyond
- One way Andreas coped with his loss was to create a series of portraits of Elena, which became a much-loved family memorial of her life
This story shows how much retirement income Elena would receive from a joint life annuity based on our annuity rates in February 2024.
Pros and cons of a single life annuity vs joint life annuity
| Single life annuity | Joint life annuity |
| Stops when you die | Keeps going after you die (if your dependent lives longer than you) |
| Gives you a higher income | Gives you a lower income |
| Pays out a regular, guaranteed income | |
| Can’t be changed once you’ve set it up | |
What happens to a joint annuity if your spouse passes away?
If you set up the joint annuity and your named spouse or dependant dies before you, it will keep paying out to you then just stop when you die. If your spouse set up the joint annuity and you’re the named dependant, some or all of the payments that went to them will start going to you.
How is a joint annuity taxed?
Any life annuity income you get is part of your taxable earnings. The amount of tax you, or your partner or dependant, may pay on it will depend on your personal circumstances:
- It’ll change according to your income tax rate. This will also apply to whoever the payments switch to after your death.
- If you’re under 75 when you die, your surviving dependant will not have to pay any tax on any income that now goes to them.
- If you die when you’re 75 or older, your surviving dependant will pay tax on any annuity income at their highest rate.
Tax is always a complex area so we recommend getting a professional steer on how much tax you or your loved one might have to pay on any joint annuity payments.
What should I do next?
Now you know how joint annuities work, you can:
- Find out what your retirement income could be with our Annuity Calculator
- Get quotes from across the whole market at our Annuity Ready site
- Learn more about what happens to an annuity when you die
- Get free guidance at the Government’s Pension Wise site
- Find an independent financial adviser at the Unbiased site
- We also offer a Retirement Advice service
