Enhanced annuity
An enhanced annuity typically offers more money than a conventional annuity, and can be applied for by people with certain medical conditions. The option is based on the assumption that people with health problems of a certain type have shorter life expectancies than those who have a clean bill of health.
Many people might think someone will have to have a very serious condition, like heart disease, or a form of cancer, to qualify, but other types of conditions which are less serious could still see someone qualify for an enhanced annuity. For example, a smoker, or someone who has a proven raised cholesterol level, may be able to get one from some providers.
This type of policy is also sometimes known as an impaired health enhancement. Unfortunately, working one out often involves a not too optimistic and rather grim process, whereby an insurer asks an applicant a series of health questions, and may even want to have them assessed. Essentially they are trying to work out how much earlier the person might die so they can work out their enhancement accordingly. Things like death rates from certain diseases are used, and someone who has survived something like cancer might qualify.
To expand on this further, enhanced annuities are typically granted to people who are suffering from high blood pressure, high cholesterol, multiple sclerosis or who have survived a heart attack or cancer. Current cancer sufferers can also qualify for enhanced rates, particularly those with bowel, pancreatic, liver, breast, or lung cancer.
When it comes to medical assessments, it is common for an insurance company to ask for a general practitioners report, or GPR. This is done to make sure that what someone has written on an application form is correct before the company concerned agrees to pay a higher income.
Remember the insurer who provided your personal pension may not automatically offer you an enhanced rate when you come to retire. This is why it is unwise to agree to any standard annuity which is sent your way by your regular provider as you approach retirement. The reality is someone could get a much higher pension income at no added cost with an enhanced annuity from another provider.
Enhanced rates for smokers first arrived in the 1990s, and some firms followed this up by introducing some other relatively common medical conditions which are now more common in UK residents. This even includes diabetes, which can command different enhanced rates depending on the provider. Diabetes, for annuity purposes, is divided into three regular categories which usually involve different risks and therefore different enhanced rates - these are diabetes controlled by a diet, diabetes which is non insulin dependent, and insulin dependent diabetes.
This means even some relatively common medical conditions can lead to someone getting a bigger pension and potentially enjoying a better standard of life with their retirement time. Although an enhanced annuity involves essentially conceding the fact that you might not live as long as someone in a different set of circumstances, it can make a huge financial difference. Getting help from an independent financial adviser may further open up the options available to someone who thinks they might qualify.
