Poor health can be good for your pension
Smokers and drinkers can benefit too
Smokers and those with poor health can get more from an annuity as they have a shorter life expectancy
MORE than three-quarters of people aged over 55 don’t know medical conditions or lifestyle choices, such as smoking and drinking alcohol, could mean they get a bigger pension income.
This leaves tens of thousands of people at risk of losing out on cash after giving up work. And that can add up to thousands of pounds over the typical 20-year retirement.
Research from Legal & General found most people have no idea they could get a better deal from their pension savings because they do not know enhanced annuities exist.
Unlike other types of insurance, such as travel cover, when it comes to cashing in pension savings and turning them into a lifetime income (an annuity) you can end up better off if you have more medical problems.
One in 10 people thought that, as with other insurances, ill health would be detrimental to them and would reduce the amount of money they receive in retirement.
Meanwhile almost one in five thought it wouldn’t make any difference to the money they’d get.
Worryingly, one in 20 thought that telling a pension firm about a medical condition would cause their application to be rejected outright. The opposite is true.
The research also revealed that a large number of people approaching retirement are not aware what an annuity actually is. Around half couldn’t accurately describe the product.
Emma Byron, managing director at Legal & General retail retirement income, said: “Customers are confused about how annuities work. People with health conditions, as well as smokers and drinkers, stand to benefit from better annuity rates – but only if they disclose everything to their financial adviser or the annuity company.
“First and foremost, we need to help customers to understand the potential benefits of annuities, which offer them a guaranteed income for life in retirement.
“Part of that is about education and information, but it’s also important that our industry talks plainly to consumers, removing the jargon and explaining the options in a clear, helpful way.”
ENHANCED ANNUITIES EXPLAINED
An annuity is a product you buy to create a lifetime income from your pension savings.
They are offered by insurance firms that calculate a return on your savings pot based on how long they believe you will live.
People with health and lifestyle factors, such as smokers and those with high blood pressure or more serious illnesses, can qualify for enhanced annuities.
These pay out larger incomes as insurers predict these people will live shorter lives.
The basic rule if you are considering buying an annuity is to NEVER simply accept the offer from the pension firm you have saved your pension pot with. You should compare the market to ensure you get the best return.
Simply by shopping around a typical saver can get a 10% increase. But those with health issues, and smokers, can get up to a 40% boost to their income.