Enhanced and Impaired Life Annuities
Did you know, you could get paid a higher rate on your annuity if you’re in poor health?
What is an enhanced annuity?
Enhanced annuities explained
An enhanced annuity, also known as an impaired life annuity, gives you more income in retirement based on your health and lifestyle choices. Essentially, it gives you a way to earn an income from your pension with payments determined by your medical history, lifestyle choices and current state of health.
If you’re a smoker, over or underweight, live in certain postcodes or are in poor health, you may be able to benefit from an enhanced or impaired life annuity, which pays a higher guaranteed income for as long as you live, based on a reduced life expectancy.
ENHANCED AND IMPAIRED LIFE ANNUITIES
What do you need to know about impaired life annuities?
It’s important to share your overall health
Medical conditions like high blood pressure or cholesterol could lead to an increase in the income you are offered.
Your lifestyle choices can affect your income
If you smoke, are overweight or underweight you could also qualify for a higher income than you would be paid from a lifetime annuity.
Where you live matters
Some areas have a lower life expectancy rate, which can also affect your total income. If you live in an area where life expectancy is lower, this will be reflected in your income.
You must be honest about your answers
When getting an annuity quotes, annuity providers or advisers will ask you a series of questions related to your health and lifestyle, so it's important to be honest.
How much more could you get with an enhanced annuity?
What your total income will depend on
Your total amount of income each year could depend on multiple factors, such as:
- Your smoker status
- Existing health conditions
- Health conditions you’re at risk of
- Lifestyle choices, including alcohol consumed each week
- Your total BMI
- Your current postcode
Annuity rates also fluctuate in line with The Bank of England, so they can be higher or lower depending on the date you purchase one.
When is an impaired life annuity right for you?
You may want to consider an enhanced or impaired life annuity if you are aware of any existing health concerns you suffer from, or if your family history suggests you’re at high risk. There might also be some lifestyle factors, such as smoking, which means you can claim enhanced annuity rates.
If you’re unsure whether you qualify or not, simply ask your provider or speak to a retirement specialist.
Medical conditions covered by enhanced annuities
What medical conditions are covered?
When you apply for an annuity, you’ll need to have been diagnosed with a condition.
- Lifestyle: These are normally conditions associated with smoking, drinking alcohol, or leading an unhealthy lifestyle. Your postcode is also included under lifestyle.
- Hereditary: Conditions that affect your family, such as heart disease, could also affect your life expectancy if you inherit it.
- Life-limiting disability: If you’ve been diagnosed with a life-limiting disability, such as dementia, your annuity income could be much higher.
- Sudden illness: Sudden and unsuspected illnesses, such as strokes or heart problems, could entitle you to receive enhanced annuity rates.
Every provider covers different medical conditions, so check in with them to see if your health conditions qualify.
Applying for an enhanced annuity
How do you apply for an enhanced annuity?
A retirement specialist can let you know if you’re eligible for an enhanced annuity and can look into the best rates for you as well, saving you time. They’ll help you apply for the right products too.
They’ll also work with you to ensure you understand everything your annuity has to offer. It’s worth noting that going straight to a provider might prove more challenging. Some providers don’t offer an enhanced or impaired life annuity, so you might need to shop around first before you apply.
At LV=, our friendly team of advisers are on-hand to give you informative, supportive and non-judgemental advice.
Mon to Fri: 8.30am - 6pm
For Text Phone first dial 18001
Calls will be recorded and may be monitored for training and audit purposes.
Enhanced annuities advantages and disadvantages
What are the advantages and disadvantages of an enhanced annuity?
Advantages
- An enhanced annuity gives you a higher income than a lifetime annuity, guaranteeing you an income for life.
- You can protect your income against inflation by increasing it annually or selecting an investment-linked annuity.
- You can protect your income by taking out a death benefit for your loved ones. They can receive a regular income or a single lump sum when you pass away.
- You can choose how often you want to receive your income and when the money goes into your bank account. Being paid ‘yearly in arrears’ will give you the highest income, and being paid ‘Yearly in advance’ will provide the lowest income.
Disadvantages
- If you die shortly after the plan starts you may not receive the full value you purchased, depending on the options you have purchased.
- There is no flexibility to vary income to suit your needs, meaning you can’t access your funds in full.
- It's not possible to cash in your annuity or claim it back other than through your chosen income frequency or a death benefit.
- If you die aged under 75 and took value protection, we'll pay out the death benefit amount tax-free. If you're 75 or over the amount will be taxed at the beneficiary's personal rate of income tax.
Tools and Calculators
Handy tools to support your retirement planning
Annuity Calculator
Using today's rates our calculator can give you a snapshot of the income your pension savings could buy you in retirement. You can also choose to add your health details to personalise your quote even more!
Fixed term annuity calculator
Our fixed term annuity calculator gives up to date results based on current rates. We shop around the whole of the market to get you the best quote for your specified income and/or guaranteed maturity value.
State pension Age
Looking for your state pension age and what you can expect to get? Our friends at Gov.uk have you covered.
ADVICE & GUIDANCE
What's the difference between advice and guidance?
Advice
Advice is given by a professional adviser such as IFAs, financial planners, wealth managers and pension specialists. Advice is regulated by the FCA, protecting you from negligent advice and will give you tailored recommendations for your individual circumstances and ensure that the best option, or combination of options, for your circumstances is found, even if this goes against what you originally thought to be the best decision for you. Taking advice usually costs money.
Speak to one of our pensions specialists today and see how we can help you find the best income for your pension. We can:
- give advice on all types of pensions
- maximise your pension income
- help you make the best possible use of your hard-earned savings.
Guidance
Guidance gives a general overview of the options available on the market for free by highly trained specialists. Guidance services won't tell you what to do with your money and you will need to research the market to find the right products and providers to suit your needs and preferences. There's no protection available, but taking guidance is a good place to start to help you understand the various choices available.
For guidance on your defined contribution pension we recommend Pension Wise, a free government service from MoneyHelper offering impartial guidance on your pension options.
To book an appointment call 0800 138 3944 8am to 8pm Monday to Friday.
Pension Wise won't recommend any products or tell you what to do with your money.
FINANCIAL ADVICE
Need help with your enhanced annuity?
Have a commitment-free chat with one of our friendly advisers today. Start your conversation by giving us a little more detail.
Mon to Fri 8.30am-6pm
For TextDirect: First dial 18001
We will record and/or monitor calls for training and audit purposes