Choose your pension option
This important decision will determine the amount of your lifetime monthly pension payments and the amount your spouse or beneficiaries may receive when you die.
Factors to consider when choosing a pension option
The pension option you choose when you retire is one of the most important financial decisions you’ll make and will affect you for the rest of your life.
No matter which pension option you choose, you will receive a monthly pension until you die. However, your choice of pension option will determine the amount paid to you each month and the amount paid to your spouse or beneficiary(ies) after your death.
To decide which pension option is best for you, you’ll want to consider:
- Your and your spouse’s age
- Your and your spouse’s health and life expectancy
- Your dependants and their financial needs
- Your family and its financial situation
- Your income needs and future plans
- Other factors that may apply to your personal situation
- Ways you want to provide for others and leave a legacy
Single life versus joint life pension options
You need to decide between a single life or a joint life pension. Your decision will depend on whether you have a spouse and if they will need any of your pension income after your death.
If you have a spouse, by law you are required to choose a 60 per cent joint life pension. Your spouse can sign a waiver giving up this benefit.
You can only choose a single life option if either of the following applies:
- You do not have a spouse
- Your spouse has signed a waiver giving up their right to a minimum of a joint life 60 per cent pension
A guarantee period is how long your pension will be paid to a beneficiary. If you die within the guarantee period, the remaining benefit will be paid to your named beneficiary(ies).
You can choose:
- A guarantee period of 5, 10 or 15 years - for a single life pension or any joint life pension under 100 per cent
- No guarantee period - for a single life pension or joint life option under 100 per cent
The guarantee period does not apply to a joint life 100 per cent pension because your lifetime pension will continue to be paid to your spouse after you die.
If you choose a single life pension option with no guarantee period, you will receive a monthly pension until you die.
If you choose a joint life pension option with no guarantee period, you will receive a monthly pension until you die. After you die, your spouse will receive a continuing pension equivalent to the joint life percentage you chose until their death.
If you choose a single life pension option with a guarantee period and you die within the period, your pension benefit will be paid to your beneficiary until the end of the guarantee period. Your beneficiary may receive either the continuation of your monthly pension to the end of the period or a lump-sum payment. If you live beyond the guarantee period, you will continue to receive your monthly pension for the rest of your life, but there will be no continuing pension paid to your named beneficiary when you die.
If you choose a joint life pension option with a guarantee period and you die within that period, your full basic lifetime pension will continue to be paid to your spouse for the remainder of the guarantee period. After the guarantee period, your spouse's pension payment will be reduced to the joint life percentage you chose (for example, 60 per cent in the case of a joint life 60 per cent option, for their lifetime).
If you chose a joint life pension with a guarantee period and you die after the guarantee period, your spouse will receive a continuing pension equivalent to the joint life percentage you chose (for example, 60 per cent in the case of a joint life 60 per cent option).
A pension with no guarantee period will result in higher monthly pension payments than a pension with a guarantee period. A shorter guarantee period will also result in higher monthly payments.
Important things to keep in mind
You cannot change your decision after 60 days from the date your pension is granted, and depending on your situation, you may not be able to change it at all.
If you have a former spouse, you may be required to provide some of your pension to them under the terms of a separation agreement or court order.
We recommend you speak with an independent financial adviser before making your pension option decision. Once you have made your choice and your pension is granted, you have 60 days to change your option (this may not apply if you have a spouse). After that time, your selection is final and cannot be changed.