Enhanced and Impaired Life Annuities for a higher retirement income
Are you – or is someone you know – approaching retirement age and interested in maximising the income you could get from your pension?
Open Market Option
Purchasing an annuity allows you to convert your pension ‘pot’ into a regular income for the rest of your life, giving you peace of mind. But you don’t have to accept the annuity offered by your pension company and have the right to buy the annuity from another provider who offers better rates or different ways to generate retirement income. Make sure you shop around for the best deal so you get the highest annuity rate you can. This is known as the ‘Open Market Option’.
Higher retirement income
We will explain more about your retirement options in future blogs, but today we will be looking at two particular types of annuity which could result in a higher income for you when you cash in part of your pension. These two types of annuity are known as ‘Enhanced’ and ’Impaired Life’. Some industry estimates suggest that as many as 70% of people taking retirement could be eligible for such products.
An enhanced annuity works on the basis that, if you have a particular lifestyle or health issues (including being a smoker or overweight) you will have a shorter lifespan than someone who does not. Annuity companies calculate that, as you are unlikely to live as long, they can afford to pay you more while you are still alive.
Impaired Life Annuity
Impaired-life annuities are aimed at people with a particular serious health problem such as high blood pressure heart bypass surgery or cancer. It is a more specific contract and looks at the person applying for it in more detail, for example what type of heart attack or what type of cancer? In general, the shorter the life expectancy, the higher rate the annuity provider is prepared to pay.
Here at Marchwood IFA, we would like to think that you take independent financial advice on many aspects of your financial affairs; mortgage, insurance, investments and pensions. But even if you have not taken such advice on any other area, it is essential to do so when considering annuities (that’s not just our advice, it’s the recommendation of Which? consumer magazine and website). Decisions you make as you retire affect your income for the rest of your life. Just make sure you tell your adviser about any health or lifestyle issues so that he or she can search the whole market for the enhanced annuity that is right for you.