Single or Joint Annuity?
When it comes to choosing an annuity, one of the first decisions you will make is likely to be that of whether to take out a single or a joint annuity. But what difference will it actually make to your income?
Single Annuity
Simply put, a single annuity is one where you receive an income each month until you die. When you die, your annuity payments stop. Because your annuity provider knows that they will be paying out only across your lifetime, the rates tend to be higher on single annuities.
However, if you are married and you die before your spouse, he or she will receive no income from your annuity after your death. For spouses who have no income independent of your own annuity, this could be severely problematic so will only suit those who either have no spouse or whose spouse has an independent income.
Joint Annuity
A joint annuity, or joint-life annuity as it is sometimes known works differently. If your spouse outlives you, he or she will still receive some of the income from your annuity each month until their death. With a joint annuity you can stipulate how much this is. For example, a 50% joint-life annuity would pay your spouse 50% of what your annuity income was until their death.
However, because your annuity provider then faces the real possibility of paying out for a longer amount of time (given that this now depends on the life span of two people as opposed to one) it often means your rates are lower. If your spouse does not have an independent income, though, this option could secure their financial future in the event that they outlive you.