What Happens to My Annuity if I Die?

I’m considering my retirement options and one of them is buying an annuity. I know that an annuity will pay me a regular income for life, but what happens after I die? Does my annuity keep paying after death?

Question asked by Mr S Cutter
Compare Top 10 Annuity Rates
Takes approx. 60 seconds
Pension Fund
Date of Birth
Loading your options...
Thank you for using our Quote Tool
If you need some help, just call us!
T: 02084327334
Our in-house Experts are here to provide Whole of Market Advice!
Our Experts can answer all your questions
Our Experts can send you more appropriate options based on your personal circumstances

Very important if you are either Self-Employed or a Company Director.

Our online quote tool is good but our Experts are better

Oue Experts have access to far more insurers and can often find a better deal offline.

Saves you time, let our Experts do what they are best at

Answered by Michael Englefield

Annuities Explained: What Happens to My Annuity After I Die?

We often hear annuities spoken of as “income for life”, so it’s a very good question to ask what happens to your pension annuity if you die.

Unfortunately, there’s no simple answer as it really depends on how you choose to set up your annuity at the outset.

single or joint life annuity

Single or Joint Annuity?

Arguably the simplest type of annuity is a single life annuity, which is just written on one life. Here, once you pass away, the income from the annuity stops.

This could be problematic if you had dependants you want to leave the annuity income to, such as a spouse who has only limited pension savings of their own. In this instance, a joint annuity can be based on the lives of two people (you and your spouse/partner) and will continue paying out to them until their death.

Should I buy a single or joint annuity?

Joint annuities can sometimes include dependant children, although the upper age limit for this is usually 23.

Also, if you’re including someone much younger than yourself, then it’s likely that the amount you’ll receive in initial annuity income will be far lower than if you were just taking out an annuity yourself.

With all joint annuities, because the annuity companies foresees having to pay the income for longer you’ll likely face a lower initial income.

Single or joint annuity? Calculate what annuity rates you could get here >>


Annuity with Guarantee Period

If you take out an annuity with a guarantee period, your annuity continues paying out after your death for the remainder of that guarantee period.

A guarantee period is set at the start of your annuity and begins when you receive your first payment.

what is a guarantee period with an annuity?

Guarantee periods are typically set at five or ten years, but there’s technically no upper limit on the length of a guarantee period (although in reality providers tend to set the ceiling at 30 years). The longer the guarantee period, the lower the initial income will be.

With a guarantee period, if you die between receiving your first annuity payment and the end of the guarantee period, your annuity will continue paying out for the rest of the guarantee period.

So if you had a ten year guarantee period and died after receiving your annuity for only five years, your beneficiaries would still receive five years of annuity income after your death.


Capital/Value Protected Annuity

Another way to protect your annuity after you pass away is an annuity with value protection. Also known as a capital protected annuity, this allows for a return of the capital invested (less any income you’ve received from the annuity and any tax due) on your death.

You can protect all or just some of your annuity, with the amount you’re protecting having an impact on the income you’ll receive.

With a value protected annuity, when you die the the annuity company returns any part of your pot you haven’t received as income to your beneficiaries.

Value protection allows you to pass down unused annuity income as a lump sum

Note that if you’ve received more from your annuity than your pension pot is worth, you won’t get anything back.

If you’ve chosen a joint annuity for a dependant’s pension, you can have the lump sum paid out on the death of the dependant, if there’s any left.

This lump sum return to beneficiaries is usually tax-free if you pass away before the age of 75 and subject to income tax at the recipient’s highest marginal rate if you die after the age of 75. Inherited pensions are almost always free from inheritance tax.


Can My Family Inherit My Pension Pot?

If you’re worried about what happens to your pension income after you die, you may need to ask yourself whether an annuity is really right for you. Most annuities stop paying out on the death of you or your partner. You can use capital protection for annuities, but this will be at the cost of a lower income during your lifetime.

If passing down your pension pot is a priority, then it could be a better option to look at pension drawdown. Here you move your retirement savings to a drawdown fund and draw lump sums and income from the pot as required. You can then pass on any unused funds in drawdown to your loved ones free from income tax if you pass away before the age of 75.

Neil Adams
Pensions & Investments Expert at Drewberry

Choosing between an annuity and pension drawdown is a major decision. Once you opt for an annuity you can’t change your mind, so it’s essential to get pension advice to make sure you’re making the most out of your retirement savings. The team at Drewberry is here to help – just pop us a call on 02084327333.

Inherited Pension
This information does not constitute financial or other professional advice. You should consult your professional adviser or contact us directly on 02084327333 should you require financial advice. It is important to ensure any insurance policy you take out is suitable for your needs.
Compare Top 10 Annuity Rates
  Takes approx. 60 seconds
Need help? 
Call us on 

Frequently Asked Pensions Advice Questions

I’m just about to retire and can take my pension now so I need to try and work out what to do with...
I am getting myself up to speed with all the changes in the pension legislation in the 2015 Budget and...
I’m planning to retire in a few years time and was wondering if it’s possible for me to top...
I’ve been at my current employer for a number of years and have built up a pension entitlement,...
Need Help? Live chat now and get an instant answer from our Experts...


Our Latest Reviews
Chris Wade

Provided excellent, in-depth advice on the income protection market and researched the market thoroughly to find cover which suited my needs.

Charlotte Traoake

Exceptional service from Oliver Wigdor! In less than 24 hours after our initial phone call discussing life insurance I now have a policy in place. The call was conducted with the utmost professionalism especially when handling the sensitive personal questions. Thanks again will be recommending to friends and family!

Christian Sawyer

I have used Victoria before who is always very efficient and very experienced. Her professionalism is worthy of very high regard.

We are rated 4.9/5 based on 2149 independent client reviews.
To read more of our independent client reviews click here →
4.92 / 5 Average
2149 Reviews
V Mashru
Overall Rating
Have dealt with Robert Harvey for many years now for my insurance needs. Always incredibly helpful and finds the right cover that’s appropriate for me. Nothing is ever too much. I appreciate it he help and advice.
J Norbury
Overall Rating
Jake Beale was really professional, helpful and informative.
I Capital Ltd
Overall Rating
Nadeem Farid was very helpful and consistent in setting up our company group insurance. service was efficient at all times. thank you
R Elliott
Overall Rating
Excellent knowledge and support. Also always available which was refreshing
R Catton
Overall Rating
A fantastic and professional service that Victoria gave us. It made the whole process seem smooth and straight forward ! It's a refreshing change to deal with someone who actually knows what they are talking about.