More annuity options and higher pension annuity rates, smoker and enhanced, that’s what’s available these days in the pension annuities market place, and some say that causes confusion. Indeed, some research carried out recently revealed that 56% of the UK population do not understand what a pension annuity is. And 73% are somewhat confused about enhanced annuities and the rates available. Consumers often know something about pensions and retirement, but the word annuity itself remains unexplained to too many, and it really is important.
What is an annuity anyway? Well, an annuity is a policy that provides an ongoing income for the rest of the policyholder’s life. The money to buy that annuity comes from the hard earned pension fund built up in a pension plan. Income levels, or pension annuity rates, are traditionally determined by the age and gender of the policyholder. However, over the past years there have been some interesting developments in the annuities market. For example, as a regular smoker it is likely a retiree would get enhanced annuity rates.
Does that mean the cost of the enhanced annuity is a lot more expensive? No, an enhanced annuity provides a higher annual annuity income compared with a standard annuity, and are aimed at retirees who, statistically, may have a shorter than average life expectancy. A smoker fits into this category, so the income would be higher each year for the same annuity purchase price. The same applies to retirees with ill health, they are also likely to be eligible for higher enhanced annuity rates.
