What exactly is an enhanced annuity? You've probably guessed that it's a bit better than a normal annuity, but how exactly?
An enhanced annuity can pay you a better income than a normal annuity, as it takes into account your lifestyle as well as your medical and occupational history. It’s based on the assumption that your life expectancy will be shorter – annuity providers calculate that they’ll have to pay you an income for a shorter amount of time, so can afford to pay you more during that period.
This will essentially use up your pension pot more quickly, but crucially, if you defy the odds and live longer, you’ll still receive the same heightened level of income – annuity payments are guaranteed for life, however long that may be.
Importantly, enhanced annuities are priced according to your individual specifications, so may consider some or all of these factors:
While all of this is unpleasant to think about, you may be able to secure a far higher retirement income by purchasing an enhanced annuity – as long as you are completely honest on your application. You don’t even need to have a serious medical condition to qualify; if you have any form of health or lifestyle condition that could impact your life expectancy, even something as simple as drinking alcohol, you could receive an increased income (though the level of uplift will depend on the severity of your condition).
To find out whether you would qualify for an enhanced annuity, compare annuities now.
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.