UK enhanced annuity sales rose to £4.48 billion in 2012, an increase of 49% from 2011, according to recent research. Towers Watson found that, in fact, sales in October to December set a quarterly record, at £1.32 billion.
What are enhanced annuities?
Enhanced annuities provide bigger pension payouts over a shorter period of time for those with serious medical conditions or with negative lifestyle factors, such as those linked to weight, smoking or occupation. They were first introduced in the UK in 1995 and have rapidly gained a substantial market share in the annuities field. The range of products on offer includes annuities for serious medical conditions, annuities for smokers, and annuities enhanced as a result of lifestyle factors such as weight or occupation.
A growing market
Enhanced annuities are growing in popularity, reaching an ever-widening cross-section of the population. Qualifying for an enhanced annuity could mean that the income you receive is increased by around 20% to 50% compared to the lowest standard annuity, depending on the seriousness of your condition. Whether you could receive more or less than this depends on the specific health or lifestyle condition you have. JustRetirement.co.uk estimate that around 60% of people may qualify for an enhanced annuity when they retire.
Health issues can mean higher income
An enhanced annuity takes into account all the factors that might affect your longevity – for example, where you live, whether you smoke or drink, your lifestyle, and your medical history. Because those who have the healthiest lifestyles and/or have no pre-existing health conditions are, statistically speaking, likely to live longer, the company providing the annuity stands to benefit financially from taking on clients with shorter life expectancy.
Disclosure is vital
Unlike in the case of life insurance, where health problems can cost you more in premiums, enhanced annuities can be of benefit to those with health problems by offering a higher income in retirement. Bob Bullivant, chief executive of Annuity Direct, advises that: "It is absolutely vital to disclose all medical conditions. Even something common like high blood pressure can entitle you to a higher income. When you are buying an annuity this is the one time when the more medical conditions you disclose the better. This additional income is paid for the rest of your life - so if you outlive the statistics you really can gain."