More than 150,000 retirees are missing out on £56.6million each year which they could get if they purchased an enhanced annuity, research from LV= has suggested.
Because enhanced annuity rates
are calculated individually, they can offer a higher level of retirement income to people with certain medical conditions or circumstances, such as high blood pressure, smokers
, or those who are overweight.
A 62-year-old male retiree in the UK who has a standard annuity but qualifies for an enhanced one could be an average £7,300 better over the course of their retirement if he had purchased an enhanced annuity instead, an increase of 22.7 per cent, LV='s Missing Income report found.
While the UK enhanced annuity market grew by a third in 2008, LV= estimates that four out of 10 annuitants could qualify for some form of enhancement, such as impaired health annuities
, and believes that the market is a long way from reflecting this.
"It's definitely a positive sign that the enhanced annuity market is growing. More people are taking up the Open Market Option
, which allows them to buy an annuity from the most suitable provider for them," commented Matt Trott, head of Liverpool Victoria Annuities
"However, thousands of annuitants are still missing out on a higher income in retirement," he continued.
"Just 27,482 annuitants purchased an enhanced annuity in 2008, whereas our research shows that a further 150,000 people could have qualified for one. Given the current economic climate, and the fact that seven out of ten (69%) pre-retired people are now more concerned than ever about their financial security, people simply can't afford to miss out on the chance of increasing their income in retirement."
Mr Trott explains that the disparity between those who are eligible for enhanced annuities
and those that apply for them can be accounted for in part by people's reluctance to reveal their personal circumstances to a financial advisor.
But, he said, if people are open about their lifestyles and other factors then this could ultimately help them to improve their standard of living by increasing their income "so it's vital they are upfront about these aspects".
It also falls to the financial advisor to encourage their clients to be open about their medical background and lifestyle choices, he added, and the benefits that this can bring.
"Financial advisers should always consider enhanced annuities when they write new business, so they can be sure they are meeting individual customers' needs.
"This, plus more openness from people about their medical or lifestyle conditions, will help to ensure that the missing £millions end up in the right place, the pockets of ordinary people who need to maximise their income in retirement."
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