When most people retire, they accept the annuity rate their pension provider offers them. What many never discover is that their health and lifestyle — the very things they might assume would count against them — could entitle them to a significantly higher guaranteed income. That is what an enhanced annuity is for.
How an enhanced annuity works
A standard lifetime annuity converts your pension pot into a guaranteed income for the rest of your life, with the rate based mainly on your age and the size of your fund. An enhanced annuity (sometimes called an impaired life annuity) works the same way, with one difference: the provider also considers your health and lifestyle. If your circumstances suggest a shorter than average life expectancy, the provider can afford to pay you more each year — in some cases up to 60% more than a standard rate.
Who can qualify?
Far more people than you might expect. Over 1,500 medical and lifestyle factors can lead to an enhanced rate, and they are not limited to serious illness. Common qualifying factors include high blood pressure, raised cholesterol, diabetes, heart conditions, asthma and other lung conditions, a history of cancer or stroke — and lifestyle factors such as being a current or former smoker, above-average alcohol consumption, or being overweight. Even your postcode can influence the rate you are offered.
Because the qualifying conditions are so broad, industry research has consistently suggested that a large proportion of retirees could qualify for some level of enhancement — yet many never find out, simply because nobody asked them the right questions.
Why disclosure is everything
With most financial products, declaring health conditions works against you. With annuities, it is the opposite: the more you disclose, the higher your income could be. This is why our annuity questionnaire asks for detail about medications, readings and diagnosis dates — every condition declared is another opportunity for a provider to improve your rate. All information is treated in the strictest confidence.
Things to weigh up
An annuity is a long-term commitment: once it is set up, the rate is locked in permanently and it cannot normally be changed or cancelled, so it is essential to compare the whole market first rather than accept a single offer. You should also consider which options you need — such as a spouse’s pension, inflation protection or a guarantee period — as these affect the income you receive. An annuity will not suit everyone, and free impartial guidance on all your retirement options is available from MoneyHelper.
How to find out if you qualify
Checking costs nothing. Our free comparison service searches the whole of the annuity market — including Aviva, Canada Life, JUST., Legal & General, LV=, Scottish Widows and Standard Life — using your personal and health details to find the highest guaranteed income available for your circumstances. You can read more on our enhanced pension annuities page, or start your comparison now.
This article is for general information only and does not constitute advice. Enhanced annuity rates depend on your individual health, lifestyle and circumstances, and not everyone will qualify for an enhancement. An annuity cannot normally be changed or cancelled once set up. We will not provide advice or recommendations as part of our non-advised annuity comparison service; the decision is always yours. Free impartial guidance is available from MoneyHelper. Retirement Professionals Ltd is an appointed representative of pi financial ltd, authorised and regulated by the Financial Conduct Authority. FCA number 622943.