Many will lose retirement income if partner dies, research finds

More than half of Scottish couples over 40 risk losing some or all of their pension when their partner dies because they are failing to make provisions for each other, according to a report out today.

Only 48 per cent of couples have made plans to ensure that pension income will be paid to the surviving spouse when one dies, research by insurer Prudential found.

It said 39 per cent of couples in Scotland do not have arrangements to ensure that pension income continues to be paid after one has died, while a further 13 per cent do not know what will happen to their pension income and other investments after the death of their partner.

With annuity rates at an all-time low and people living for longer in retirement than ever before, the implications for the surviving partner of losing some pension income are increasingly serious.

Vince Smith-Hughes, head of pensions development at Prudential, said many couples find it difficult to broach the subject of finances and death.

But he added: "Losing some or all of your income in retirement is a terrible risk to take and couples should think carefully about what happens in the event of one partner's death, and seek advice where appropriate to ensure this eventuality is taken into account."

The Prudential research coincides with a report from Schroders showing that a quarter of retirees receive income from their partner's pension fund.

The investment management firm said income in retirement is typically a fifth below the level people expect before they retire. Those in retirement have an average income of 17,212, more than 4,700 less than those yet to retire expect it to be, and about a third below the what people typically spend in retirement.

Schroders found that retired people spend an average 1,904 a month, yet the average private pension pot of 25,000 would generate income of 1,250 a year, based on typical retirement spans, although that is topped up by other pensions including state benefits.

More than a third of retirees also get some income from savings deposits, though millions have been forced to dip into their savings and investments capital in the last year to cover living expenses, according to Schroders.