I’m splitting with my husband at 68 and solely have a state pension – what do you advise? STEVE WEBB replies

I’m 68 and in the process of separating from my husband. I currently do not have a private pension only my state pension.

I have £150,000 in savings in my name and I would like advice on how to use this money to give me an income for life to help with the running costs of my home.

Steve Webb replies: I was sorry to read that you face upheaval in both your personal life and your finances at this stage of your life.

My reply offers some guidance as to some of the issues you might want to think about, which I hope will be useful to you and to others in a similar situation.

But this is no substitute for personalised financial advice which could help to get you on the right path for the rest of your retirement.

Will you be negotiating a financial settlement with your husband?

A key starting point is to understand how your finances might be affected by any future divorce settlement.

A decision about how you use your own savings could be quite different if, for example, you were going to be getting some pension rights from your husband as part of the settlement.

Although it can be tempting to ignore pensions in a divorce settlement because they complicate things, pension wealth can often be a major part of the total wealth of a couple.

Ignoring pensions could lead to a very unfair outcome.

For example, suppose that the reason you don’t have a private pension is that you spent time out of paid work raising a family while your husband was in a job and building up a good pension.

Had you remained as a couple, you would have benefited from his pension, but if you separate and divorce, you get no share unless it forms part of the settlement.

Given that (in this scenario) your husband was able to work and build up a pension partly because you were sacrificing your career to bring up a family, it’s not unreasonable to take account of his pension wealth in any settlement.

If your husband is getting (or will get) a traditional ‘final salary’ type regular pension then one outcome of a divorce settlement could be that you would be paid a percentage of his pension by his pension scheme, giving you some of the regular income that you seek.

Alternatively, if your husband built up a substantial ‘pot of money’ type pension, you might get a share of that pot transferred into a pension in your name.

Another approach would be to ‘offset’ the value of pensions, leaving his pensions intact, but awarding you a bigger share of the other assets of the marriage (such as a bigger share of a jointly owned family home).

As you will see, these are complex matters and you should certainly take professional advice on all of this, but I would urge you not to ignore pensions in any future divorce settlement.

From a purely financial point of view, a separation but not a divorce could be the worst of all worlds.

Unless there is a comprehensive and fair settlement on separation, you risk losing any benefit from your husband’s pension income (because you are no longer living together), but not securing a fair share because there is no divorce settlement.

In short, before you can make any other financial decisions about how to use your savings, knowing exactly where you stand post separation/divorce is pretty essential.

Your future living costs

Assuming that you have resolved these matters, you can then consider what to do if you still need more regular income to help with living costs.

One key suggestion is that you retain an easily accessible fund for unexpected costs.

As a homeowner you will know that sometimes you have bills for repairs and maintenance which you didn’t expect and if you have used all of your savings to generate a regular income you may struggle to meet these lumpy items.

In terms of using your savings to produce a regular income, one option would be to buy an income for life, known as an ‘annuity’.

The way this works is that you hand a lump sum over to an insurance company and they guarantee in return to pay you a regular income for as long as you live.

Annuity rates are much better now than they have been in recent years, so you may be pleasantly surprised by how much guaranteed income you could buy in exchange for a lump sum.

As I’ve previously written, annuities come in all shapes and sizes, and you can therefore customise your annuity to meet your needs.

You presumably won’t need the annuity to pay out to a partner if you die, so a ‘single life’ annuity is likely to be appropriate.

But you can choose whether you want a flat cash amount each month or whether you want it to rise each year to reflect inflation.

As you might expect, an increasing (or index-linked) annuity costs more so you would be offered a lower starting figure than if you simply went for a level annuity.

Another option is to have some sort of guarantee period whereby even if the worst were to happen soon after you bought the policy, there would be some ongoing payment (or lump sum) for a fixed period of time to the benefit of your heirs.

Crucially, you should shop around when buying an annuity as different providers will offer you different amounts of money.

You should also give full details on the application form of any health conditions you may have as they will generally offer a higher rate to someone in less than perfect health.

I hope that these general tips are helpful, but I would reiterate that resolving your financial position in the wake of your separation and/or divorce feels to me like a first priority.

Once you know where you stand you can make a better-informed decision, ideally informed by some professional advice, to guide you through your many options.