Spouse protection

Rather obviously, there's no point having the spouse’s benefit if you don’t have a spouse but, if you do, the differences in the types of benefit on offer need to be appreciated.

Guaranteed spouse benefit is just that - the income is guaranteed to be paid out after the main annuitant dies.

However, these payments continue for a duration of years, usually five and not beyond ten. On the face of it, if you buy the five-year option, the income is paid for five years after your demise. Right?

Wrong. The five - or ten - years start the moment you buy the annuity. So if you buy the ten-year option and die after nine years, your surviving spouse only gets an income for a year. However, It’s a cheap option - you’ll probably only reduce your potential income by half of one percent.
Average male life expectancy says you’ll live until 82. Buy your annuity at 65 with a ten-year spouse guarantee and simple arithmetic, never mind the law of averages, says your spouse is unlikely to benefit.

Perhaps the better option is a joint life annuity where, on the death of the main annuitant, the income is paid to the surviving spouse for the rest of their life.

The spouse income is usually 50%, 66.6% (two-thirds) or 100%. However, this benefit substantially reduces the amount of income you will receive at the start. As an example, instead of, say, 8%for a level annuity, you’ll be looking at around 5.5%.(depending on your age, of course) However, you’re assured that the level of benefit you choose will be paid out to your spouse during the rest of their lifetime.