Legal and General (L&G) is rolling out its new enhanced annuity rates product, Annuity Plus, to all advisers following a successful pilot carried out last year. The simplified enhanced annuity product focuses on the five most common health risks affecting retirees, smoking, diet-controlled diabetes, blood pressure, high cholesterol and also high or low body mass. It will be offered via an automated “fast-track” application process involving a simple, two-page questionnaire focusing only on the five named health risks, resulting in advisers getting an instant decision for their clients.
Annuity Plus also offers a potential uplift, i.e. higher enhanced annuity rates, to retirement income of up to 15% under the maximum annuity rate, compared to their standard rate. Other examples of potential increased income under Annuity Plus are up to 7% extra for a male smoking 10 cigarettes each day for the last 12 years, up to 8% extra for a female who has diet-controlled Type-2 diabetes and up to 15% extra for a male who has been smoking 15 cigarettes a day for the past 18 years and also has diet-controlled diabetes. A male aged 65 with a £30,000 purchased single life annuity would receive a five year guaranteed level income of £2,095 under the Annuity Plus contract, compared to £1,937 under the standard annuity contract.
Around 120,000 retirees will miss out on about £60m of additional annual retirement income this year by not arranging an enhanced annuity, recent research by L&G suggests. It attributes this apparent lack of appetite for enhanced annuities to the “complex and drawn out” paperwork involved. Tim Gosden, their head of annuity product development for individual annuity business says that independent research they have conducted highlighted that the current enhanced annuity application process can be complex and time consuming. In the UK, around half of people aged over 65 actually have high blood pressure and by answering just four simple questions this could result in an uplift of around 15% in their retirement income.
