When buying a lifetime annuity with your pension funds, disclosing health conditions could work in your favour.
If you have a health condition that could reduce your life expectancy, are overweight or smoke you could be offered an enhanced annuity. An enhanced lifetime annuity pays more than a basic rate annuity. It’s paid for life. It doesn’t matter if your health improves, or you change your lifestyle.
Can I get an enhanced annuity?
When you apply for an annuity, the provider will assess your life expectancy. They consider your health and lifestyle. You may qualify for an enhanced annuity. Many conditions that entitle you to extra income are common in later life. These include high blood pressure and diabetes. Being overweight, smoking, and drinking alcohol regularly could also qualify you for enhanced rates and more income.
Examples that might entitle you to a higher income include:
- High blood pressure
- Heart disease
- Kidney failure
- …and many more
These are just some conditions that could secure you a higher income.
You may need to provide supporting evidence from your doctor. Always be honest about your health conditions.
To avoid delays, providers may check your health after your annuity payments start. If your doctor doesn’t verify the information you provided, your income could be reduced.
How much extra income will I receive?
Each provider calculates your income differently. The uplift you receive depends on the severity of your condition. For example, according to data from Unbiased you could get 30% extra income if you have diabetes. If you have multiple health conditions, these could be grouped together to result in significantly more income.
What happens to the money in an annuity when I die?
When you die, your annuity income payments stop. No money is returned to your loved ones. You can add features to your annuity to leave something behind. These features include value protection or guarantee periods. You could also choose a joint-life annuity. You can find out more about these features in our guide ‘What happens to my annuity after I die?’
How can I get the best enhanced annuity rates?
When buying an enhanced annuity, shop around for the best deals. According to According to a 2014 study carried out by the FCA, 60% of people stay with their current pension provider when buying an annuity. But as many as 8 out of 10 of these people could have secured a higher income by shopping around.
The annuity rate set out when you buy your annuity is fixed. So, even if annuity rates increase in the future, you will not benefit from additional income. But, if annuity rates fall, you are protected from a potential decrease in the income amount.
Annuity Ready can help you compare quotes from annuity providers across the whole annuity market including Aviva, Canada Life, JUST, Legal & General and Scottish Widows, helping you to secure a potentially better deal than the one offered to you by your pension provider.
Do I need advice before I buy an annuity?
Before 2015, buying an annuity was the only way to fund retirement. But now, over 55s have various options.
Buying an annuity is just one option. MoneyHelper explains your options for using your pension pot to fund retirement. Make sure you understand all your options and their implications.
Our customer service team can guide you through the annuity application process. We cannot offer financial advice or tell you if an annuity is right for you.
Pension Wise is a government service from MoneyHelper. You are entitled to free and impartial guidance if you are aged 50 or over. You can receive tailored guidance online, over the phone or face-to-face.
If you need further help, you may wish to get in touch with an independent financial adviser. You can find a local financial adviser using the Retirement Adviser Directory on the MoneyHelper website.
Or, if you’re ready to begin, compare annuity quotes now.