The widows abandoned without a pension

By JAMES SALMON FOR THE DAILY MAIL
Updated: 21:16 EST, 16 March 2010

Thousands of widowed women every year are condemned to live without a pension because their husbands took the wrong advice at retirement.

In a scandal dubbed a 'ticking time bomb' by one expert, 65 pc of savers - just under 300,000 a year - buy a pension that may not pay a penny to their widow once they die.

Often, they will not even be aware they had a choice because many pension companies only give details of 'single life' annuities.

Left short: Margaret Williams's husband had a single life annuity

There are two basic types of annuity which are bought with pension savings to pay an income for life:

• A single life usually ends when the person who bought it dies, though it can be set to pay for a minimum of five or ten years;
  
• A joint life pays less each month, but guarantees to pay a pension to the widow for as long as she or he lives.

A 65-year-old man with a £100,000 pension pot could get £555 a month from the best single life annuity.

A joint annuity, which would give two-thirds of his income to his widow, would pay £508.

With £10.8billion ploughed into annuities last year alone, experts fear hundreds of thousands of widows could be forced to fall back on the state pension or benefits.

Pensioner Margaret Williams is typical of those affected. She must scrape by on the state pension due to this innocent but fateful mistake by her late husband.

As a successful small businessman, George Williams squirreled away every penny he could into a pension to take care of them in their retirement.

But when he stopped working at age 65, he was advised to buy a single life annuity with his nest egg, unwittingly excluding his wife from the comfortable retirement he had worked so hard for.

Mr Williams' single life annuity was guaranteed to pay for a minimum of ten years and gave them vital extra income of £8,000 a year.

But George died just five years after taking out the pension. Now Margaret - aged 55 at the time of his death - will be stripped of this vital income by the time she turns 60.

Mrs Williams, from Catford, London says: 'I feel like I've been left in the lurch. In those days women relied on their husband's pension. We lived very modestly so that George could provide for our future. I had no idea that it would just be taken away.'

The average life expectancy for a man who reaches 65 today is 82, compared with 85 for women.

In a typical marriage the man is three years older than the woman, so those buying a single life annuity risk leaving their wife without an income for six years.

Those in the baby boomer generation, who are now reaching retirement, tend to rely on their husband's pension.

Dr Ros Altmann, a leading pensions campaigner, says: 'This is a ticking time bomb.

'Thousands of people every week are making irreversible decisions with their pensions that could jeopardise their spouse's future.'

The financial services industry has been accused of not doing enough to alert people to the risks of leaving their spouse in the lurch when they die.

Information sent to those approaching retirement does not have to explain the importance of married couples buying joint life annuities.

Quotes on annuity rates sent to customers are also typically based on single life annuities.

Dr Altmann says: 'The regulator has been asleep at the wheel and the government, which forces people to buy annuities, is also to blame.

'The vast majority of people don't receive financial advice when they buy an annuity.

'They accept these quotes for single life annuities and don't realise the potentially disastrous consequences.'

But a spokesman for the Association of British Insurers says: 'Our research has identified that many people want to maximise their income and, also indicated that married people will often buy a single life annuity having discussed their partners' needs.'