Widows with inadequate cover could face nine years on breadline. NFU Mutual offers five top tips for couples approaching retirement. Insurance, pensions and investments specialist, NFU Mutual is advising couples approaching retirement to consider how their partner would support themselves during and after bereavement, so to avoid unnecessary financial heartache.
 
Commenting on the choosing the right annuity, Shelagh Hamer, pension specialist at NFU Mutual, said: “It’s vital anyone approaching retirement takes the time to sit down with their husband or wife to discuss annuity options and implications. All too often, the forms are signed without considering how one might get by without the other. “Single life annuities – typically the default choice for annuities – leave many women at risk of having no income from their husband’s private pension fund. Joint life annuities are more likely to offer a longer, happier outcome for married women who are dependent on their husband’s income.
 
“It’s not easy to think about life without your loved one, but it’s something that needs to be borne in mind when choosing the right annuity. It’s a sad fact that many spouses, typically women, have little or no private pension provision and rely on their partner’s retirement income to get by.” On average, women marry earlier than men and live for longer. Women who do not secure their own pensions, or help to ensure their partner chooses the right annuity option, could face a typical nine years of widowhood dependent on state benefits and, statistically, a meagre private pension.
 
Hamer concluded: “It’s particularly important women are aware of these pitfalls as many will have sacrificed their career and the chance to build their own pension pot to raise a family. Once the pension is taken, the annuity can’t be altered so it’s vital that couples take the time to make the right decision.” To help ensure both partners are provided for, NFU Mutual has compiled five top tips for couples approaching retirement:
 
Budget
Look at your income and expenditure and try to work out how much you’ll need to get by. Would-be pensioners can be pragmatic with the level of support they would like their widow to have. A widow’s pension can provide some, or all, of the original annuity but it will provide a lower income from the outset.  
 
Check your rates
Check your annuity forecasts are based on facts and not assumptions. For instance, some forecasts will be based on a husband being in worse health and three years older than his wife. If, as in many cases the facts are incorrect, the annuity rate will be out too. Inform your provider and see the figures change.
 
Compare annuities
Don’t be bamboozled by the ‘Open Market Option’ it just means you’re entitled to shop around for the best deal and it can mean up to 30 percent extra in your annuity. 

Spread contributions
For stay-at-home spouses, a break in career doesn’t have to mean a break in pension contributions. A partner can make contributions of up to £3,600 a year on behalf of their spouse, which would include basic-rate tax relief of £720. The tax treatment of pensions depends on individual circumstances and may change in the future.
 
Up your contributions
If you earn between £50,000 and £130,000 a year, then now is the time to make the most of the current rules. From April 2011, the Treasury will implement changes to restrict pension tax relief, so it’s important that some high earners should try to maximise this year’s tax-efficient pension contribution. Anyone can start taking their pension from age 55. The value of pensions can fall so you may get back less than you invested.