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Annuities and DeathDealing with death

When a person retires, an annuity purchased for him or her is intended to be paid throughout the lifetime of the pensioner. If the pensioner dies prematurely, what can be done to protect surviving dependants?

Briefly, there are two options:
  • To incorporate a minimum guaranteed period of payment in the contract for the annuity.
  • To set up an annuity on a "joint life" basis.

Generally, for a pension being set up on retirement, it is usual to put in a minimum guaranteed period of payment. The most common guaranteed period is 5 years, but a guarantee of up to 10 years is allowed. The length of the guaranteed period will affect the overall cost of the annuity.

Joint Life Annuities

This is really the best way of ensuring that an income will continue to be available for a dependant after the death of a pensioner. There is a cost factor involved - and the actual cost will depend upon the age and sex of dependant, compared to the age and sex of the pensioner. The younger the surviving dependant, the more expensive the joint life option will be. In general, life expectancy for women is higher than that of man of the same age.

Widow / Widower's Pensions - Death-In-Service

If a pension is set up following the death of a pension scheme member in the service of the employer, the Revenue Commissioners generally do not allow any guaranteed period to be attached to the pension being set up for the surviving spouse. However, this rule docs not apply in some cases. For example, if there are dependant children, they may permit the pension to be continued until the youngest child ceases to be dependent. These are technical matters to be dealt with by pension scheme trustees.