What is an enhanced annuity and how can I get one?

If you have a health condition or certain lifestyle issues then you could get a higher income from your pension, by buying an enhanced annuity.

An annuity gives you a guaranteed income for life, which you can obtain by trading in all or part of your pension pot.

Although the income is guaranteed, it’s usually not very high. However, an enhanced annuity will pay you more.

What is an enhanced annuity?

An enhanced annuity is simply an annuity that pays a higher income.

You can get one if your annuity provider believes your life expectancy is lower than average (because then it won’t have to pay out for so long).

How can I get an enhanced annuity?

Many issues can lower your life expectancy in the eyes of an annuity provider.

Health conditions are a major factor, such as:

• Diabetes
• Asthma
• Heart disease
• High blood pressure
• Cancer
• Kidney failure

This is just a short list of some common conditions – there are many more that qualify.

Other factors can include an unhealthy lifestyle, such as smoking or excessive drinking.

Even where you live can be an issue: some postcodes have lower life expectancies for the population, due to factors like crime, pollution and poverty.

Any or all of these could contribute towards qualifying you for an enhanced annuity – and so more money in retirement.

Will my spouse benefit from my enhanced annuity?

Some annuities continue to pay out a reduced amount to your spouse after your death.

The same can apply to an enhanced annuity, even if your spouse is perfectly well. Similarly, if you are in good health but your spouse is not, you may still get an enhanced joint-life annuity (i.e. one that covers you both).

There are many different ways in which a joint-life annuity can be worked out, so consult your financial adviser to be sure of finding the best deals.

How much more money could an enhanced annuity pay out?

Each annuity provider has its own way of calculating, but typically you could get as much as 30% more if you have diabetes or if you’ve had several heart attacks and between 10% and 15% more if you are considerably overweight.

Multiple health conditions (and other negative factors) can add together to result in a considerably more generous annuity, so make sure everything is considered.

How do I apply for an enhanced annuity?

Not all annuity providers offer enhanced products, so do some research before applying.

To get the best rates, you should speak to a financial adviser.

They’ll do the legwork for you by searching for providers that offer the best enhanced rates for your conditions and lifestyle.

They can also advise you on all the qualifying factors to include in your application, and find products not available on the open market.

You are likely to need written evidence from your doctor to prove to your provider that you are living with certain health conditions.

What should I be aware of when seeking an enhanced annuity?

Usually, having a health condition makes an insurance product more expensive.

With annuities it’s the other way round: the worse your health, the more money you may receive.

That said, remember that an annuity is for life – once you’ve bought it, you can’t change your mind.

Therefore, talk to your adviser to check whether an annuity is the best option for you, or whether you might achieve a better lifestyle by taking your pension in another way.

Get financial advice

An enhanced annuity could be a smart choice if you have health conditions or lifestyle factors that might shorten your life expectancy. By declaring these conditions, you might unlock a higher income in retirement, providing you with more financial security. 

Remember, not all providers offer enhanced annuities, so doing your homework and consulting with a financial adviser is crucial to finding the best deal. With the right information and support, you can make an informed decision that helps maximise your retirement income.

Let Unbiased match you with a financial adviser for financial advice tailored to your unique health conditions and lifestyle factors to ensure you get the best annuity rates available.