Impaired annuities

For people who are in poor / bad health and smokers

An annuity is a one off purchase, which will determine your income for the rest of your life. You can't change providers once you take an annuity out, so it is important that you make sure you buy the right product in the first place.

When the time comes to buy an annuity, it is just about the only time in financial product shopping, when it actually pays to be in poor health.

The cold hard truth is that if an insurance company considers you are likely to die sooner than average, it will be more generous when setting your annuity, because basically if does not expect to be paying your annuity for long.

This bad-health increased annuity is called either “impaired” or, more aptly, “enhanced” in industry jargon.

At present just one in 10 people shopping for an annuity opt for an impaired policy, despite the fact that one in four pensioners would qualify for one.

According to the Association of British Insurers, this means that around 125,000 pensioners are collectively missing out on around £250 million in extra retirement income, each year.

If you smoke, you should almost certainly ask about an impaired annuity, as research shows that a liking for the evil weed, will boast your annual annuity payment by between 8% and 23%.

However it is not just smokers who can benefit. It is said that there are around 1,000 separate medical conditions that would qualify someone for an enhanced annuity.

Research from the Bank of Scotland found it is possible to increase retirement income by up to 39%, once medical conditions had been factored into the calculation.

Even if you consider that your medical conditions are not serious, the cumulative affect of having, asthma, high blood pressure, raised cholesterol, being overweight, and/or type two diabetes can be enough to gain a significant uplift on your annuity payment. So always mention them to you adviser.