‘Will my wife miss out on my £50k annual pension if I die first?’

Dear John,

It’s heartening that you are thinking ahead with such consideration for your wife. Many couples avoid the difficult conversations around “what happens if and when” as they get older, because it can be too upsetting – and then, sadly, widows can struggle as a result.

I tend to favour a matter-of-fact approach, and one that involves regular, small conversations and time to think and digest the implications of different decisions, with agreement from both sides on what’s going to be best for you and any family members.

Firstly, I just want to urge you to check that your nomination of beneficiaries forms for your pensions, also sometimes known as “expression of wishes”, are up to date with the details of who you want to benefit when you die. 

This is especially important because generally pensions are not treated as part of your estate and therefore are not part of your will. These forms are often missed or filled out with the wrong beneficiary details.

Whether someone reaches state pension age before or after April 6 2016, and also whether their partner did, affects entitlements, though it sounds as if you have already worked out what will happen to your state pensions if you die first.

It’s a good idea to ensure that your wife has the details of your pension, including your National Insurance number, so that if you do pass away first, she can easily use the “Tell Us Once” service to inform government organisations, including the Department for Work and Pensions (DWP) and HM Revenue and Customs. 

Given the recent history of incorrect state pension payments made by the DWP, it would also be a good idea to give your wife your estimate of how much she is likely to receive from your state pension. If you aren’t sure, you can contact the Future Pension Centre.

With 50pc of your work pension and the bulk of your state pension, plus your wife’s own work pension, your savings and your Sipp, she should be on track to maintain a “comfortable” lifestyle (based on industry definitions of what counts as comfortable, anyway), after your death.

If the savings are held in a reasonably high-paying account with a 4pc interest rate, this could generate an extra £2,800 a year in (partly taxable) income for her, without her needing to touch the capital. If she wanted to use the capital, she could take more as income.

If she also wanted to use the Sipp for income, she would be able to draw down around £5,000 a year comfortably (again, this would be taxable) with a reasonable expectation that this would see her through her own retirement years. 

This is based on 4pc a year being drawn down. While 4pc is typically viewed as a sustainable withdrawal amount, your wife might be able to draw down a greater amount without worrying about extinguishing the fund, depending on her age at the time.

You don’t mention leaving an inheritance to any children you might have, but if you do have children, and this is also part of the plan for your savings and money held in the Sipp, then you might wish to discount these amounts from what would be available for your wife.

Even without this additional income from the Sipp and the savings, she would still have an annual income of around £30,000 from your work pension and state pension. 

This would be somewhere between what the Pensions and Lifetime Savings Association (PLSA) considers enough for a “moderate” lifestyle for a single person (£23,300), and a “comfortable” one (£37,300).

For couples, the “moderate” lifestyle income is £34,000 and the “comfortable” one is £54,500. Your current joint income is above this benchmark for “comfortable”. 

With the income from the Sipp and the savings, she’d be on track for the comfortable lifestyle according to the PLSA definition. But of course, what counts as comfortable is subjective and because your current income is slightly higher than the estimate for the couple’s “comfortable” amount, she might find that she would want a slightly higher amount than the PLSA estimates for a single person to maintain your current lifestyle on her own. 

This is achievable, though it really does depend on whether you both want anything left in the Sipp or the savings account after you both die.

It would be worth talking to your wife about what happens in different scenarios, should you die first. For instance, discuss whether she would use the savings or the Sipp for additional income first, and the tax implications of each of the decisions open to her, as well as a few worst case scenarios.

For example, what happens if there is a big, costly one-off spend required, such as home maintenance, and where this money would come from. 

It’s also worth talking through how her tax bill is likely to change, so there are no unwelcome surprises.

Write to Pensions Doctor with your pension problem: pensionsdoctor@telegraph.co.uk. Columns are published weekly