There is a simple, but brutal, reason why enhanced annuity rates are higher than standard annuity rates. If you consider other financial products, particularly insurance, if you smoke or if you’re in poor health you get a worse deal. The opposite is true when it comes to annuity rates. Smokers and people in poor health can all negotiate higher annuity rates, for the brutal reason that their life expectancy is actually lower than for healthy people, so the annuity provider calculates it won’t have to pay out for so long.
Enhanced annuity rates or impaired life annuity rates are designed for people who smoke, are obese or have a serious medical condition or condition. Several insurers offer these, which can boost your annuity income by up to 30%. Philip Brown, head of retirement at Partnership, says £1billion worth of enhanced annuities were sold in 2009, about one in 10 of the total, yet as many as four out of 10 people actually qualify. He urges that if you smoke, if you have been ill or even if you’re only slightly overweight it is worth checking out what rates are available.
