Enhanced annuities are a type of the traditional conventional annuity.
In the same way as with a conventional or standard annuity, the company providing it takes on all the risk of providing you with a guaranteed income for life.
However, enhanced annuities take into consideration detailed information about your health and lifestyle to provide you with a more personalised annuity quotation.
Qualifying for an enhanced annuity could mean a significant increase in your retirement income. Evidence shows that compared to the lowest standard annuity, this could mean potential increases of around 20 per cent for minor conditions, around 30 per cent for moderate conditions and around 40 per cent (sometimes even higher) for serious medical conditions. Based on these figures if a standard annuity paid you £5,000 per annum, then a 40 per cent increase would be £7,000 per annum.
As this income will be paid for the rest of your life, then it is a significant amount extra. Whether you could receive more or less than this depends on the specific health or lifestyle conditions you have. It is estimated that over 60 per cent of people at retirement may qualify.
When an annuity provider quotes for an enhanced annuity, they will pay close attention to the factors that will affect your life expectancy. This includes where you live, whether you smoke and drink, your lifestyle and your medical history.
Unlike in the case of life insurance, where health problems cost you more in premiums, in the case of enhanced annuities health problems can mean a higher income in retirement. This is because the companies providing the enhanced annuities make judgements about your life expectancy, which they factor into their calculations.
Every enhanced annuity quotation is prepared on an individual basis using information gathered about you. That’s why they can sometimes take a little longer to set up than a standard annuity, but the end result is an annuity that more accurately reflects you as an individual and could pay you significantly more income.
If you are approaching retirement or feel that this scenario may be applicable to your situation, then please make sure that you investigate all the options open to you.