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Have you heard of an enhanced annuity? This is where your annuity income could be increased because of a specific health or lifestyle condition, and the uplift could make a significant difference to your payments. Yet few of those approaching retirement realise that this kind of annuity exists, with 70% of those aged 55+ unaware that certain factors can enhance their quotes.
That's according to a new study by Hargreaves Lansdown, which highlights the benefits of an enhanced annuity for those eligible. The study found that over half (56%) of open market annuities arranged by the firm get an uplift because of a health or lifestyle condition, with an average increase of 14% – something that could make a real difference to your retirement income.
Conditions that could have an impact include smoking (someone on 10 a day could see a 9% uplift to their annuity quote), diabetes (14%) or a previous stroke (10%), and even something as common as high blood pressure or cholesterol could result in a 1% increase to a standard annuity rate.
If you're approaching retirement and are considering your options, now's the time to start thinking about an annuity – and whether or not you could be eligible for an uplift. Annuities can provide a guaranteed income, but the payment is set at the time you take out the product, so it's essential you make sure you're getting the best rate possible.
Much of this depends on comparing the options thoroughly (don't just opt for the rate offered by your pension provider) and being completely honest in terms of your health and lifestyle, thereby ensuring you're getting the uplift you're entitled to. Find out more about how to choose the best annuity by reading our guide.
"Buying an annuity, where you exchange some or all of your pension pot for a regular guaranteed income, is still one of the only ways to ensure you won't run out of money in later life," said Nathan Long, senior analyst at Hargreaves Lansdown.
"We're used to any ailments or bad habits costing us more when we buy insurance policies, but the opposite is true when you apply for an annuity, in fact on average an enhanced annuity increases the pension payouts by 14%. Even if you plan to keep your pension invested and use drawdown, getting an annuity quote can make sure you are making a fully informed decision."
Considering an annuity? Compare the options using our quote tool
Seek independent guidance from Pension Wise
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