Joint life annuities are great for those who have families dependent upon their retirement income, but what other reasons influence your choice of a joint life annuity for your pension investment?

A joint life annuity is different to a single life annuity as it will pay an income to your partner, your spouse after your death for the rest of their life.

There are other types of annuities that exist that allow for such payments after your death, but usually for a fixed period of 5 to 10 years. After that 5 to 10 year period the annuity ceases so an alternative source of income would be required. With a joint life annuity, such a thing is not a worry for your dependents.

If you have a spouse or partner, the annuity income will be paid to your significant other for the remainder of their lives. When you acquire your annuity, you can make the choice of how much your dependents are going to receive.

You can designate 100% of what you were receiving to go to them or you can choose two thirds or 50% of the amount. Either way, the higher the designated amount, the higher the cost that is associated with it. If the cost is high, then the annuity payment you receive in retirement will typically be lower.

Some things to watch out for in a joint life annuity are:

A joint life annuity is going to be more expensive than a single life annuity because of the fact that the insurance company expects to pay out income for a longer period of time due to the fact that payments will continue to your dependents after your death.

Some providers may not set up an annuity for a partner or spouse who is ten or more years younger than you are. The reasoning behind this is because some annuities allow payments to continue for a designated period of 5 to 10 years after your death.

If you are in a partnership, you will need to check with your insurance company to see if your partner is eligible to receive the income from your annuity if your partnership is not a civil partnership. This is going to be entirely dependent upon the insurance company's policies.

In the case that you have a protected rights pension fund, you are required to purchase a joint life annuity that pays a 50% spouse's pension if you are in a civil partnership or are married.

Things to consider

It is a good idea to compare the different annuity rates of joint life annuities when making the decision to make an annuity purchase. This is important because your financial well being after retirement is going to depend on it as well as the financial security of your family after you die. You want to make sure that they are financially secure, especially if they depend on your income to pay the bills. By consulting with a financial adviser, you can determine via comparison and the size of your pension fund, what option is best for you.

So when should you start thinking about getting a joint life annuity?

Well, if you know when you're going to retire, about four months before your retirement is a good time to start shopping for an annuity. It is easy to know how much money is going to be in your pension, so you're going to have a great idea as to how much you are going to be paid by your annuity.

You can explore the different companies and their rules to see what one will fit you best. You also don't want to keep your spouse and children out of the equation, especially if they rely on you for income. You'll need to make the decision for them to receive an income for the rest of their lives or for a fixed period of time after your death, whichever your pension amount can provide.

At least you know that you have an option as far as making sure you are set after retirement and that your family is comfortable after you are gone. It leaves that peace of mind for everyone and leaves one less thing to worry about. This is why a joint life annuity is a great idea for someone with a family.

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