Enhanced annuities are a type of 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 personal annuity.
Increased income in retirement
Qualifying for an enhanced annuity could typically mean an increase in your retirement income of around 43%* compared to the lowest standard annuity. Whether you could receive more or less than this depends on the specific health or lifestyle condition(s) you have.
We estimate that 60% of people at retirement may qualify for an enhanced annuity.
Importance of disclosing medical and lifestyle conditions When an annuity provider quotes for an enhanced annuity, they will pay close attention to all the factors that will affect your life expectancy.
This includes where you live, whether you smoke and drink, your lifestyle and your medical history. They can then build a more accurate picture of your life expectancy on which they base their calculations.
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 based on your health and lifestyle, which they factor into their calculations.
This could mean an increase of around 55% (and sometimes even higher) in the amount you can receive compared to the lowest standard annuity for serious medical conditions, around 43% more income for moderate conditions and around 24% for more minor conditions.*
An enhanced annuity tailored to your situation 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. Read about the advantages and disadvantages of an enhanced annuity.
We would aways ask you to discuss your situation with a financial adviser. If you don't have an adviser you could use Unbiased.co.uk to help you find one local to you.
* Based on a male aged 65, with a £45k fund, 5 year guarantee, no escalation, no value protection, based on RH2 7RU postcode, compared to the lowest standard annuity rate offered via Avelo Exchange on 06.03.12.
Useful links Options to include with an annuity
Example case study: Mr P, Hampshire
Example case study: Mrs P, Yorkshire