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Planning for retirement can be a challenge – but it’s even more difficult for those with health issues who may need to pay extra for care in the future. Fortunately, when it comes to cashing in your pension, you have options, including buying an annuity which provides you with a guaranteed lifetime income.
If you have health problems, you could get an enhanced annuity which offers higher payments because of your medical history or any diagnosed conditions.
Below, we explore what an enhanced annuity is, what medical conditions qualify and enhanced annuity rates.
What is an enhanced annuity?
An enhanced annuity, also known as an impaired annuity, is a type of annuity that provides higher regular income payments to individuals who have certain medical conditions or lifestyle factors that may reduce their life expectancy.
Predicting a shorter life expectancy compared to someone in good health, some annuity providers will pay more on the basis that these payments will be made over a shorter period of time. Therefore, an enhanced annuity can be a more suitable option for people suffering with health problems.
Regardless of how long you live, with an enhanced annuity you are still guaranteed an income for life and you can even set up your payments so that they increase annually in line with inflation.
What medical conditions qualify for an enhanced annuity?
The medical conditions that qualify for an enhanced annuity are wide ranging and every provider has their own criteria. Some of the common ones include:
- Asthma
- Diabetes
- Cancer
- Heart disease
- Kidney failure
- High blood pressure
- Obesity
Annuity providers will take into account your previous health history – for example, if you’ve had a heart attack or stroke, you could receive higher payments. Your lifestyle can also make an impact, for example if you’re a smoker or you drink excessively, this could be a contributing factor.
How much more could an enhanced annuity pay?
The amount that your enhanced annuity pays will depend on your provider and your medical condition. If you have diabetes, it’s estimated that you could get from 30% to 50% more depending on the type of diabetes you have. If you’re a smoker but otherwise in good health you could get 15% more. If you have complex or multiple conditions you may be entitled to higher payments.
Purchasing an annuity is often irreversible, so it’s important to compare deals, providers, and get expert advice before you make a decision.
What happens to an enhanced annuity when you die?
When you pass away, your payments will end unless you have an arrangement in place with your annuity provider. However, you could opt for a death benefit to look after your loved ones after you’re gone.
You can choose to protect up to 100% of the amount you used to purchase your annuity by adding value protection. This means your beneficiary will receive a lump sum after you pass away even if they are in perfect health. You can decide who receives it and, if you pass away before the age of 75, it’s income tax free.
Another option is a joint-life annuity which pays your beneficiary an income, or an annuity guarantee period which continues paying for a set period of time after your death.
Do I need a medical examination for an enhanced annuity?
When applying for an enhanced annuity, you will need to fill out a health questionnaire listing your medical conditions and health history. Unlike other insurance products, the worse your health is, the higher your payments will be, so providing accurate and detailed information will work in your favour.
Whether you need a medical examination depends on your provider and your overall health. Some might ask you to give permission for them to get a medical report from your doctor or undergo a medical assessment – which is uncommon. It’s important that you remain truthful when handing over information otherwise your provider could cancel your offer.
How can I apply for an enhanced annuity?
Before applying, it’s important to do your research and compare products and rates. Your annuity will be calculated based on a variety of factors – age, location and health – to name a few and you will need to decide if you want any extras such as a death benefit.
A financial advisor can help you get the most suitable deal on an annuity because they can access products that are not advertised. They can also provide application support and help you choose the most appropriate annuity for your circumstances. If you’re considering an enhanced annuity or need more information, speak to a pension advisor at Almond Financial.
