Ill health can lead to enhanced pension annuity rates

Scenario: individual being retired by his company on ill health grounds. He is aged 59 and has a company pension and also a private pension. What might be the position if retirement income is taken based on ill health? Might he lose out financially?  

The Pensions Advisory Service say on this matter: If he qualifies for a pension from his employer’s scheme based on ill- health then he should not lose out on the amount of pension he gets.
If the employer’s scheme is a salary- related scheme, the rules often provide for an increase to the pension (the retirement income) for someone suffering from ill health, compared to someone choosing to retire early in normal health. However, there could be special terms in the scheme’s rules.

If his pension scheme is not salary- related (and this goes for the personal pension he has too), he should make sure that his medical condition is taken into account when a pension annuity is purchased.

Some annuity providers may be able to offer him better terms (and therefore a higher annuity income) because of the ill health – and this is often called an enhanced annuity or an impaired- life annuity. He might therefore get the best annuity rates via this route, but, as always would be wise to seek advice.

Tags: enhanced annuity

This entry was posted on Friday, November 14th, 2008 at 11:43 am and is filed under Annuity rates, General, Ill health, Important considerations, Open market option, enhanced annuity. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.