Enhanced annuity and impaired life annuity entitlement does vary a little. The medical conditions that might entitle you to an impaired life annuity include heart disease, stroke, angina, cancer (various), chronic bronchitis and long-standing diabetes. Some insurance companies (the annuity providers) recognise hypertension. The acid test is the degree by which your medical condition is likely to reduce your life expectancy. Most people seeking impaired life annuities have to get their doctor to complete a medical questionnaire. Some annuity providers have a standard form. Simpler lifestyle annuities can be arranged on the basis of a box-ticking medical type form which you complete. These annuities offer better annuity rates if you smoke more than 10 cigarettes a day or are seriously overweight, defined as being 30% overweight for your height, age and gender. Manual workers might also qualify for higher annuity rates. 

Impaired life annuities are best suited to those people with more than a year to live. Someone looking at less than a year to live would do better to seek a special dispensation from the Revenue allowing them unlimited access to their pension fund, tax-free. Here’s an example; Mrs G, 60, of Eastbourne, suffers from a malignant liver tumour and long-standing hypertension, and she had two personal pensions. An annuity specialist was able to combine these and find her enhanced annuity rates 20% higher than those available from her own pension conpanies, resulting in her being thousands of pounds better off in her retirement as a result of shopping around.

Impaired life annuity rates can make quite a difference to your annuity income. People in poor health, or with unhealthy lifestyles, such as smoking or being overweight, should seek out specialist advice, otherwise they will be quoted a standard annuity rate based on normal life expectancy for a person of their age and gender and not the enhanced annuity rates from impaired lives or lifestyle annuities. Impaired life annuities pay much higher annuity rates to people with certain medical conditions because of their likely shorter lifespan. Providers include Just Retirement, MGM Advantage, LV=, and Partnership, as well as some well known insurers.

Most of these companies sell their enhanced annuities through independent financial advisers (IFAs). Some experts rightly claim that it’s a shame more people don’t use the open market option, which allows them to shop around with their pension fund to find the best annuity rates available. Some retirees could end up with an improvement in rates of up to 30%, because of their lifestyle, occupation or their ill health. Here’s details of an extreme case transacted a few years ago; a 75-year-old man with lung cancer was quoted a standard annual annuity income of just over £21,000 by his existing pension provider. A specialist enhanced annuity provider was able to boost this by about 80 per cent to nearly £38,500.

How do you get the best enhanced annuity rates? When annuity providers (insurance companies) provide quotations for their current annuity rates, one of their primary tasks is to calculate your life expectancy. They will include a number of factors in this calculation including your health, your lifestyle, your smoking habits, your previous occupation, and even your postcode in some cases. Your smoking habits and medical condition(s), both past and present, can all affect your life expectancy. Some annuity providers take these details into account when setting their rates. In some cases, this can mean much higher income levels than those payable from a standard conventional annuity.

It is important to note that any entitlement to a higher annuity rate will be based on a possible reduction in your life expectancy, and not related to your quality of life. That is, you may qualify for a higher annuity income without necessarily having any impairment to what might be termed normal living. For all these annuities, each case is considered individually. If you have any questions regarding enhanced annuity rates please feel free to contact one of our advisers on 0800 169 1256.

Here’s a good example of someone receiving the best enhanced annuity rates by taking appropriate advice when arranging his annuity income. When Mr. E., as we’ll call him, was faced with selecting an annuity, he was determined to choose something which would provide a secure income for both himself and his beloved wife for the rest of their lives. The retired manager had in mind that when it came to taking his pension, he realised that as he already had a few PEPs and ISAs that he did not want to be any more reliant on the performance of the stockmarket, so basically he wanted a guaranteed income and that is what you get with an annuity.

Mr. E. used a specialist annuity service to track down the best annuity rate, and although he plays golf several days a week he was advised that he would qualify for an enhanced annuity because of his medical history. He also wanted to make sure his wife would be provided for through his annuity arrangement and decided on a joint-life annuity with Aviva. The others were only offering about 60% and some only 50% of the initial income for his wife if he died, so he ended up with Aviva because they offered 100% instead.

There are a few questions that every insurer should ask of someone looking to purchase an annuity. First, do people  realise that they are locked into an annuity for life? Do they have any health issues (e.g. smoker, high blood pressure, overweight, heart trouble) which could mean they get enhanced annuity rates? Do they want to cover a partner? Do they want a 10-year guarantee period in case they die early? Do they want to protect against inflation? Might they want to leave money invested and just take their tax-free cash for now? And there’s probably more.

There are some likely changes with enhanced annuity rates and Alzheimer’s disease. A simple eye test used to diagnose Alzheimer’s disease sufferers is just one of several medical progressions that can be used to cost enhanced annuity plans. Advancements in medical science are continuing to have quite an impact on the annuity market, with providers finding several new ways to predict a retiree’s life expectancy. A recent report in a specialist medical journal revealed details of how a simple eye test could help diagnose Alzheimer’s much earlier than is currently possible.

Several providers of enhanced annuity and impaired life annuity plans confirmed the test would be considered for inclusion in annuity rates underwriting if it became widely available. Alzheimer’s is known to reduce life expectancy, but can also lead to much higher care costs. But some providers warned that, as dementia does not always impact life expectancy as much as other medical conditions, some enhanced rates would be small. Jules Charrington, medical underwriter at MGM Advantage, said that in terms of annuity underwriting, this development could mean younger consumers will qualify for an enhanced annuity rate, as they will have been given a diagnosis of Alzheimer’s disease and potentially other dementias, a few years prior to retirement.