Enhanced Annuities Available To Those With Medical, Lifestyle Conditions

By Author: William Waddington
Total Articles: 4762
Comment this article

Enhanced annuities can benefit those who are approaching retirement, if they themselves, or their partner suffer from a medical condition. The enhancement that might be paid varies depending on the severity of the condition, but it can be up to about 30%.

To understand how enhanced annuities work, it is first necessary to understand the purpose of an annuity. Many people save for their pension by means of schemes such as Personal Pension Plans, Stakeholder Pensions, or Occupational Defined Contribution Schemes. All these schemes are categorized as money purchase schemes, which means that when the person retires the money invested in the scheme is converted into cash, which is then used to purchase an annuity.

Annuities are sold by life assurance companies, who offer a guaranteed lifetime income, in return for a retiree's pension pot. This is a kind of insurance policy, guaranteeing the pensioner that their pension will continue to be paid no matter how many years they live after their retirement date.

In the case of a pensioner who lives for a long time after retirement, they will actually receive more money ...
... as pension income, than the life assurance company got from the pension pot. This will not bother the life assurance company that much, because other pensioners will die earlier than expected, and their overall gains and losses should balance out.

The amount of lifetime income offered by the life assurance company depends on many things, including the life expectancy of the pensioner. The effect of this can be seen in the case of women pensioners, who tend to receive lower annuity rates than male pensioners, because female life expectancy is higher.

The annuity market is quite competitive, and if the life company has information suggesting that a particular prospective customer has less life expectancy than average, then they may offer that person an enhanced annuity rate. Persons who are eligible for better annuity rates include those with medical conditions, which may shorten their life, or those whose lifestyle may shorten their life expectancy (e. G. Regular smokers).

There are many illnesses which may make a person eligible to receive a higher pension income from an enhanced annuity. These include cancers, kidney diseases, heart conditions, lung and liver diseases, diabetes and stroke. Lifestyle conditions can also affect life expectancy, and may also lead to better annuity rates.

Lifestyle conditions that may be taken into account include a regular smoking habit, a high BMI (Body Mass Index, i. E. Being obese, or overweight), high cholesterol levels, and high blood pressure. Other conditions might be considered on an individual basis.

Even a relatively mild condition may have some effect on life expectancy, and therefore the life company may be prepared to offer an enhanced annuity. In an example published by one of the major life companies, a 65-year-old lady suffered from high blood pressure and raised cholesterol levels. When her state of health was assessed the amount of annuity being offered was increased by 7%. In another example a 65-year-old man, who was a regular smoker, and had chronic pulmonary disease, chose a joint life annuity, where 50% of the income would go to his wife if he predeceased her. Despite the fact that his wife was in reasonable health, this man was offered an increase of more than 20% in his retirement income.
About Author:
Shopping around on the open market option will find you the best annuities.