Millions of widows are being ‘betrayed’ by pension schemes that ‘die’ with their husbands, a former government adviser warned yesterday.
They are left ‘penniless’ by so-called single life annuities, which do not pay out to a surviving partner.
Insurers are now making around £1billion a year by pocketing the balance of the funds rather than giving it to widows, said pensions expert Dr Ros Altmann.
Many men are opting for often complex schemes without understanding the future effect on their spouse.
And as women typically live longer than their husbands, it can leave them facing disastrous financial consequences in the future, she said.
‘The UK annuity market is failing its customers,’ said Dr Altmann.
The former government adviser said husbands were not ‘buying the right product’, with many widows saying their partners may have had no idea what they were signing up for.
In the most heart-breaking cases, women find out that they will not receive their husbands’ pension payments when they are still grieving.
About 425,000 people cash in their pension pot every year with an insurer, which promises to pay them an annuity every month for the rest of their life.
But the majority of people take out a single life annuity – which is only paid to them and stops when they die.
Many are attracted to such schemes because they offer a much higher rate than a joint life annuity, which pays out to a surviving spouse.
The clue to what is happening is in that last line.
Precisely because women tend to live longer than men a joint annuity will pay less each year than a single life one.
There’s no betrayal here, no insurance company pocketing a billion. There’s just people choosing between two products and in making that choice making the one that Dr. Altmann thinks they shouldn’t.
Well, bully for Dr. Altmann.