Smoking is good for you...when it comes to annuities Go compare with our comparison table

Smoking is good for you...when it comes to annuities

22 September 2010 / by Rachel Mason

- Ill health can enhance annuities up to 40% further
- Many pension providers don't ask about ill health
- Fair Investment Company urges pensioners to declare health issues for enhanced annuities

Fair Investment Company is urging pensioners with ill health to make sure they declare it when getting annuity quotes because they could get up to 40 per cent more for their pension fund.

"If you smoke, suffer any medical conditions or take any prescribed medication you could get enhanced annuities," explains George Ladds, head of investment and pension research at Fair Investment Company, "but most pension providers do not make this clear, meaning pensioners could be losing out on thousands of pounds.

"Around a third of people could get a better annuity rate as a result of their lifestyle or ill health, but only a few actually do. This is generally because the pension provider will not ask them about their health when doing a quote, and if you don't declare it, you lose out on a potentially much higher quote."

When the time comes to buy an annuity (which used to be compulsory at 75 but is under review following the emergency Budget) an estimated 60 per cent simply accept the quote from their pension provider without thinking to compare quotes from other insurance companies to get a better deal.

"Many pensioners are unaware they can get better rates by shopping around, but even more are unaware that declaring health issues or lifestyle conditions could improve their quotes even further," explains George.

"Almost 40 per cent of all completed annuities could be enhanced in some way due to lifestyle or medical conditions**. This is because the insurance companies will be able to quote higher based on the assumption that they will not have to pay out for as long to an 'unhealthy' person as they would do on someone with no health issues.

"Unfortunately though, many people are not aware that declaring a lifestyle condition could improve their quotes significantly, and if the pension provider/insurance company doesn't ask, which they often won't, the annuitants may never realise that they are being sold short," explains George.

He continues, "the 'ill health' doesn't even need to be that serious to qualify for enhanced annuities. Smokers, those with high blood pressure, diabetes or high cholesterol and even those who are simply overweight could benefit."

CASE STUDY 1:
A client had a pension fund of £13,992 to buy an annuity.  She smoked 20 cigarettes a day but had no other lifestyle or medical issues.  She was quoted £642 per annum from her pension provider.  By shopping around she was able to get £760 per annum, an increase of 18.3%.*

For serious health conditions, annuities are enhanced even further:

CASE STUDY 2:
A customer had a fund of £10,052 to buy an annuity.  She was quoted £462 per annum from her pension provider, who didn’t take her medical conditions into account. She had had a heart valve replacement and had Type 2 Diabetes as well as high cholesterol and blood pressure. By shopping around she was able to get £644 per annum, an increase of 39%."*

George concludes, "With annuity rates so low at the moment, it has never been more important to make the most from what you have got. Don't accept the first quote you get – shop around and make sure you declare any health or lifestyle conditions that could get you enhanced annuities."

Get more for your pension fund with Fair Investment Company's impaired health annuities service.

Ends
Notes to editors
*Client of Fair Investment Company's annuity partner, The Annuity Team
** 38% of Fair Investment Company's annuity partner, The Annuity Team's completed annuities are enhanced in some way due to lifestyle or medical conditions
 

ProviderAnnual IncomePayment TermsPurchase AmountGet Quotes
£6,950
Monthly income for life
£100,000
More Info >
£6,521
Monthly income for life
£100,000
More Info >
£6,502
Monthly income for life
£100,000
More Info >
£6,372
Monthly income for life
£100,000
More Info >
£6,154
Monthly income for life
£100,000
More Info >
Quotes based on man aged 65, £100,000.00 purchase amount, conventional, level escalation, nil guaranteed period, paid monthly in arrears without proportion. Annuity rates correct as at 22/06/2011.