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UK Retirees Missing Out on £56.6 Million Each Year

Press release: 24/03/2009

  • Over 150,000 people who could qualify for an enhanced annuity, purchase a standard annuity instead.
  • A 62-year-old man with an enhanced annuity could receive an extra £7,300 in retirement income over his lifetime.

New research from retirement specialist LV= has revealed that UK retirees could be missing out on up to £56.6 million [1] of retirement income each year by not purchasing an enhanced annuity. The LV= ‘Missing Income’ report highlights that over 150,000 [2] people could increase their income in retirement by taking an enhanced, rather than a standard, annuity.

Enhanced annuities can give people with certain medical or lifestyle conditions – for example people with high blood pressure, who smoke or are overweight – a higher level of income in retirement. This is because enhanced annuity rates are calculated individually, based on the applicant’s personal circumstances.

Despite the UK enhanced annuity market growing by one third (31.9%) in 2008 [3], this is still a long way short of the four out of ten annuitants that LV= estimates could qualify for some form of enhancement, and therefore a higher annual income in retirement.

Matt Trott, LV= Head of Annuities, said: “It’s definitely a positive sign that the enhanced annuity market is growing. More people are taking up the Open Market Option, which allows them to buy an annuity from the most suitable provider for them.

“However, thousands of annuitants are still missing out on a higher income in retirement. Just 27,482 [4] annuitants purchased an enhanced annuity in 2008, whereas our research shows that a further 150,000 people could have qualified for one. Given the current economic climate, and the fact that seven out of ten (69%) pre-retired people are now more concerned than ever about their financial security [5], people simply can’t afford to miss out on the chance of increasing their income in retirement.

“A lot of annuitants still feel uncomfortable about revealing lifestyle or medical conditions to a financial adviser. However, if people are open about their smoking habit, or the fact that they suffer from diabetes, it will ultimately help them secure extra income for their retirement – so it’s vital they are upfront about these aspects”.

A 62-year-old male could receive, on average, an extra £369 in income each year from an enhanced annuity, an increase of 22.7% [6] compared with the average income from a standard annuity. This could equate to an additional £7,380 over the rest of his lifetime [7].

However, whilst annuitants still need to be encouraged to be open about their medical background and lifestyle choices, it is also vital for financial advisers to inform their clients of the availability of enhanced annuities, and the benefits they can bring.

Matt Trott said: “Financial advisers should always consider enhanced annuities when they write new business, so they can be sure they are meeting individual customers' needs. This, plus more openness from people about their medical or lifestyle conditions, will help to ensure that the missing £millions end up in the right place, the pockets of ordinary people who need to maximise their income in retirement.”

[1] On average, an enhanced annuity could provide an extra £369 per year in retirement income. 153,318 people who could qualify for enhanced terms but purchased a standard annuity instead collectively missed out on £56.6 million.

[2] The total number of people purchasing a conventional annuity in 2008 was 452,000 (Source: ABI, 2009). LV= estimates that 40% of people purchasing an annuity could qualify for some form of enhancement. Therefore, 180,800 people could benefit from enhanced annuity terms. The number of people purchasing an enhanced annuity in 2008 was 27,482 (Source: Watson Wyatt, Enhanced Annuity Survey, January 2009). Therefore, 153,318 people in 2008 missed out on extra income in retirement by not purchasing an annuity with enhanced terms.

[3] Source: Watson Wyatt, 4 February 2009:

[4] Source: Watson Wyatt Enhanced Annuity Survey, 28 January 2008.

[5] LV= State of Retirement Report, November 2008.

[6] Annual income of £1,992 with LV= enhanced annuity, versus £1,623, source: FSA comparison tables as at 19/02/09; LV= quotation as at 20/02/09. Difference is £369, or 22.7%. The rates are based on Male, aged 62, single life, no guarantee, no escalation, with an annuity purchase price of £25,588 payable monthly in advance and an enhancement based on the average underwriting result of all quotations issued by LV= in 2008.

[7] Life expectancy for 62 year old man is 20.4 years. £369 multiplied by 20 years comes to £7,380 (Source: GAD, 2006-based principal projections).


LV= is a registered trade mark of Liverpool Victoria Friendly Society Limited (LVFS) and a trading style of the Liverpool Victoria group of companies. The new LV= brand identity was launched in March 2007.

LV= employs over 3,800 people, serves around 3.2 million customers and members, and manages around £7 billion on their behalf. We are also the UK’s largest friendly society (Association of Friendly Societies Key Statistics 2008. Total net assets) and a leading mutual financial services provider.

LVFS is authorised and regulated by the Financial Services Authority register number 110035. LVFS is a member of the ABI, AMI, AFS and ILAG. Registered address: County Gates, Bournemouth BH1 2NF