MILLIONS of women face the threat of hardship in later life because their husbands chose the wrong type of pension annuity.
Annuities, which are provided by insurers, are the means by which savers turn their pension pots into a regular income in retirement.
They come with a range of addons including, crucially, the option to continue paying income to the surviving spouse (usually the wife) after the first policyholder s death. Once an annuity has been bought, the decision cannot be reversed.
The most popular annuities are single-life plans, which pay out only as long as the policyholder is alive.
When they die, the payments stop even if that happens just weeks after the annuity begins. In such cases, the money is kept by the insurer, adding to its profits.
Two-thirds of annuities taken out today are on a single-life basis, according to industry figures. The main reason, experts say, is because rates are currently so low.
Mike Teall, annuity expert at Scottish Widows, the insurance division of Lloyds Banking Group, says: The fundamental issue we have as an industry is that a joint annuity rate, where the surviving spouse continues to benefit, is lower than a single-life rate. This means many people opt for the latter.
Pensions commentator and Government adviser Dr Ros Alt-mann blames the industry. Many women end up in poverty in later life because their husband chose a single-life annuity, not realising the implications, she says.
This is good for insurers because it cuts their risk and increases potential returns if policyholders die early.
But just who is looking after the customer in this complicated, often once-in-a-lifetime, irreversible decision?
Altmann says the problem is growing more acute as final salary pensions provided by companies where the spouse always had some benefit are fast disappearing, to be replaced with less generous schemes where savers have to make their own annuity choices.
Altmann says: Nobody properly advises annuitants before they buy, whereas with final salary schemes spouse provision was mandatory. This is a huge change for society, which leaves many women at greater risk of poverty later in life.