We estimate that 60% of clients might qualify for an enhanced annuity. But if you choose to use an annuity process that only partially considers your clients’ medical or lifestyle conditions, or doesn’t consider them at all, it could mean they don’t get the retirement income they deserve.
Case study: Chris
Chris, 65, continues to suffer from the asthma that was originally diagnosed in his childhood – with simplified underwriting the information gathering process may stop there – leaving Chris with around a 10% enhancement over a standard annuity.
But the time (around just 15 minutes) his adviser takes to go through the common quotation form means that his medical and lifestyle conditions can be evaluated as part of an estimate for a fully underwritten annuity.
Chris confirms that he has been prescribed a daily medication and was hospitalised six months ago due to an attack. This could mean an enhancement of around 19% more income, over a standard annuity.
As part of his review, Chris also advises that he recently had a lung function test, the results of which showed moderately impaired respiratory function.
This could mean that he might qualify for an enhancement of around 26% more income over a standard annuity – a significant difference to his annual income in retirement.
This illustration is based on a male age 65 with a £45k fund, no value protection, 5 year guarantee, monthly in advance, no escalation and no value protection, as at 16-06-11 from Avelo Exchange.
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Case study: John
John, age 65 has a history of poor health. He was diagnosed with bowel cancer within the last three years which was successfully removed surgically. With simplified underwriting, John could qualify for an enhanced annuity, but it might only result in an additional income of 20% per year.
However – delving deeper into his lifestyle and medical history, for example by using the common quotation form (which typically takes around 15 minutes to complete) would also capture the following information:
| Question 1 |
When exactly was the cancer first diagnosed and when was the surgical treatment?
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| Answer 1 |
Two years previously, removed surgically the month following after diagnosis.
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29% uplift over a standard annuity
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| Question 2 |
What stage was the cancer?
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| Answer 2 |
Dukes C |
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The uplift over a standard annuity has increased to 40%
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| Question 3 |
Was radiotherapy and/or chemotherapy treatment received and what is the present situation?
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| Answer 3 |
Both radiotherapy and chemotherapy was received in the month of diagnosis, leading to the complete removal of the cancer within the following five months. However, a recurrence of the cancer in the same location was diagnosed three weeks ago with proposed treatment/s under discussion.
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The final improvement over a standard annuity is 45% in this illustration
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This illustration is based on a male age 65 with a £45k fund, no value protection, 5 year guarantee, monthly in advance, no escalation and no value protection, as at 16-06-11 from Avelo Exchange.
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Case study: Melanie
Melanie, 60, completed a simplified underwriting questionnaire and disclosed that she suffers from diabetes requiring tablet treatment. As a result, she could qualify for an enhanced annuity rate of 28% above that of a standard annuity. But Melanie could be entitled to additional income each year for life, if additional information was captured.
With a fully underwritten questionnaire the following information would also be gathered, and it could amount to a significant difference to Melanie’s life income in retirement:
| Question 1: |
When was the diabetes diagnosed and please provide a list of your medications?
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| Answer 1: |
Diagnosis was 21 years ago and medications include 2 high blood pressure medications, 1 cholesterol medication and 1 diabetes medication.
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31% uplift |
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| Question 2: |
Has Melanie been diagnosed with any diabetic complications?
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Yes, diabetic retinopathy and Chronic Kidney Disease. |
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The uplift increases to 34% over a standard annuity |
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| Question 3: |
How far have these complications progressed, what treatment has been provided and what is the HbA1c reading (measure of diabetic control)?
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| Answer 3: |
The Chronic Kidney Disease is at stage 3 and laser treatment has been provided for the retinopathy. The HbA1c reading was 9.2% two months ago.
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The final improvement over a standard annuity is 36% in this illustration
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This illustration is based on a female age 60 with a £45k fund, no value protection, 5 year guarantee, monthly in advance, no escalation and no value protection, as at 16-06-11 from Avelo Exchange.
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