Enhanced Annuities

An Enhanced Annuity pays a higher income in retirement if you have a medical condition that may reduce your life expectancy.

Enhanced annuities work on the basis that by having a medical condition, you’re likely to have a shorter life expectancy than someone with a good state of health.

Therefore, annuity companies are more prepared to pay you a higher income each year on the assumption your shorter life expectancy will result in them paying out over a shorter period.

How does it work?

When you invest in an annuity, the provider converts your pension ‘pot’ (the total amount you’ve accumulated within your pension) into income payments, which are paid for the remainder of your life.

If you die before your predicted life expectancy, the insurance company will make a profit, which is used to pay the incomes of those who live longer than predicted.

If you live longer than your predicted life expectancy, you will have received a higher overall pension due to the additional payments received by the annuity provider.

The benefits

The amount of extra income you could earn in retirement depends on your actual state of health, or your lifestyle.

If you have high blood pressure or high cholesterol, you could receive around more income than from a ‘conventional’ annuity.

If you are a smoker, you may also get more income than a regular annuity. If you are very seriously ill, the extra income can be significantly higher.

These significant differences highlight the importance of getting good quality advice before you take out an annuity.