Impaired Annuities Explained

Annuities have become increasingly popular and reliable in ensuring the financial security of individuals as they age and move in to their older phases of life. There are different annuities available and choosing the right annuity with the right provider can help to ensure a stable financial life during the years of retirement. With an economy that is often tumultuous and unpredictable, many individuals are seeking ways in which to ensure that their retirement years will be as free from financial worry as possible. For some, an impaired annuity offers the most lucrative and stable means to do so.

Eligibility Factors

Annuities are offered by insurance companies and are financial products used to help secure financial stability in the years ahead. They can be purchased in a couple of different ways, either through a payment system or in one larger lump sum. At a later date, the annuity is dispersed through monthly payments to the annuitant directly.

There are several advantages to annuities, perhaps the biggest of which is that the money in the account is eligible for tax-deferment until the funds are withdrawn.  This can be hugely impactful during retirement years in that most individuals make less money during retirement than during their working years, meaning that the tax break can be increasingly more beneficial after retirement.

Annuities are paid out on a monthly basis, most often until the death of the annuity’s owner.  To ensure the appropriate timing of the annuity payments, an insurance actuary will estimate the life span of the annuity’s owner to determine the most appropriate payout each month.  There are several different factors that are considered when the lifespan is predicted. One of these is the health condition of the annuity owner.

An impaired annuity becomes an option for those individuals who have a physical condition or health concern that can be expected to decrease their life expectancy.  For those with a qualifying condition, more money from the annuity can be received on a monthly basis, since the term of the annuity is expected to be shortened. The qualifying conditions for an impaired annuity can vary but there are several that are very commonly seen by insurers. These include diabetes, heart disease and high blood pressure.

In the United Kingdom, annuity accounts are typically converted from retirement pensions. In order to qualify for an impaired annuity in the UK the expectation is that the annuity owner will not live for more than four or five years. The conditions most often accepted under an impaired annuity in the UK include cancer, stroke, heart disease and major organ failure. In the UK, impaired annuities can also sometimes be offered to residents in nursing homes. They may even be purchased rather quickly to ensure payment is prompt.

Advantages of Impaired Annuities

To qualify for an impaired annuity, the individual must have their medical history reviewed and confirmed. However, the advantages to qualifying for an impaired annuity can be tremendous. For those individuals that qualify, there is no way to verify that the years lived will be shorter than those individuals who do not qualify for the impaired annuity. That means that for those who qualify for the impaired annuity, the financial advantage can be quite beneficial if they live past the amount of years predicted given their health condition(s).

Most insurance estimates predict that an individual can receive approximately 30% more money with an impaired annuity than they would with a standard annuity.

Annuities present a way to safeguard financial security during retirement years. However, for those individuals who qualify for an impaired annuity, the increased income during what may be the last years of life can prove to be even more beneficial.

For those who qualify, the benefits of an impaired annuity far outlast those of a standard annuity.

Annuity Options

When after years of working you reach the age when you begin to think about retiring and what this might mean for your financial future and your future in general, you will no doubt begin to think about retirement schemes, investments and the possibility of taking out an annuity. Annuity schemes are run by insurance companies and each insurance company will have a variety of annuity options that you will have to choose from, should you opt for taking out an annuity.

Before you can understand annuity options, you first have to understand how an annuity works. When you retire, and you decide to take out an annuity, you exchange the whole of your pension for the guarantee of a regular income. You can decide how regularly you want to receive your income; monthly, quarterly, bi-annually or annually. Clearly there can be many variations to an annuity and one of the annuity options that you will need to decide between will be between a fixed annuity and an index related annuity.

The first annuity option, the fixed annuity, will give you a fixed income each month. This amount will not change over time. Alternatively you can choose an index related annuity which is tied to the stock market and will fluctuate accordingly. Another annuity option to think about is an enhanced annuity. Many people do not even think about applying for an enhanced annuity but it can give that little bit extra to get you through the month.

An enhanced annuity, as an annuity option, is for people who smoke, are overweight, who are on prescription medication or have been recently hospitalised. You can also of course apply for an enhanced annuity if you have a chronic illness. With this option, because your life expectancy will be less, your annuity will be higher.

Not everyone will be granted an enhanced annuity, but it is well worthy applying. You will also have to decide whether you want to take an annuity as a single person, or with your spouse or partner. And within this option there are a few more to explore. With an annuity there are many choices, not only what annuity provider you choose to go with but also the various annuity options that are also available. This is so that you can get the most out of your savings, and so that you will have financial stability well into your retirement.

What are Enhanced Annuities?

If you are about to retire, or are at least at the stage when you are beginning to think about retiring, then you will quickly realise that you need to do everything in your power to make the most out of your pension. In most cases people have saved since their first job, and now that retirement is looming, there is a worry that what has been saved will not be enough. This is a common worry and for some, the answer to this quandary will be enhanced annuities.

With annuity rates at an all-time low, it is well worth investigating the possibility of effecting an enhanced annuity plan. This is a particular kind of annuity which offers a larger annuity for people with medical conditions that could limit their life span. As many as 70% of people are missing out on a higher annuity just because they don’t think about applying for enhanced annuities, and they work in the same way as a normal annuity.

Enhanced annuities and annuities in general might seem difficult to understand but really they are a bit of a gamble between you and the annuity provider, about how long you can live. When you decide to buy an annuity, enhanced annuities or otherwise, you use the lump sum of your pension in exchange for a regular and guaranteed income that you will receive for the rest of your life. The annuity is calculated on how long the annuity provider expects you to live, and this is why with an enhanced annuity you can receive a larger income.

So, how will you know if you are eligible for an enhanced annuity? If you are a smoker, or take regular prescription medication or have been hospitalised recently, then you should certainly apply for enhanced annuities. The sum you will receive will be determined by the current state of your health and how you live. Should you be overweight, have high cholesterol, or blood pressure then you can also receive about 7% more income than a healthy person.

There are a number of variables and it will be up to you to find out about them and then apply for enhanced annuities; if in fact, this is what you decide to do. Enhanced annuities can be extremely useful in getting you through the difficult patches, and so it is wise to take advantage of what is available as much as possible.

The Facts About Enhanced Annuities

Many people coming into their retirement take no advice regarding the different options that are available when taking the benefits from their pension schemes. It is often the easy option to take the income that is being offered by your ceding provider. You could be missing out on a considerable uplift in your income. By not seeking advice you could be missing out on an income sum 40% higher.

There are a number of specialist companies offering enhanced annuity rates based on your medical history and lifestyle including rates for those who smoke. The return is determined by actuaries assuming that certain medical conditions and lifestyle factors are likely to shorten your life expectations.

Your adviser would normally complete a common quotation form which would be distributed to the providers so that they are assessing you based on the same information. Enhanced rates with some providers are available for relatively minor conditions such as hypertension and high cholesterol so it important to disclose all medications that you may have been prescribed event if you feel that overall you are fairly fit and healthy. The questionnaire will also look at your height and weight to assess you BMI and question your intake of alcohol. You may feel that you are a moderate drinker but have you ever calculated the units you consume each week?

Visit http://www.drinkaware.co.uk/understand-your-drinking/unit-calculator to determine your average weekly total.

Many people when asked if they are in good health would answer yes – however if you drink excessive amounts of alcohol each week, you have a high BMI, or you have smoked ten or more manufactured cigarettes per day for ten years or more this could result in a substantially higher level of  annuity income being paid.

It is worth noting however that if your health is extremely poor and life expectancy is low, the purchase of an annuity may not be the best option. If you should die before crystallising your pension benefits then your fund will be payable to your beneficiaries without a tax liability providing death occurs before the age of 75. Where death occurs after the 75th birthday than a tax charge of 55% would be applicable. If you had crystallised your benefits to move into a drawdown arrangement then a 55% tax charge would also apply on death. If you die shortly after taking your benefits as an annuity then the income could die with you unless you have made provision in the form of a guarantee or spouse’s benefit.

Health Condition Qualifications for Enhanced Annuity Plan?

Choosing an annuity is one of the most significant and important decisions of one’s life, as once chosen an annuity cannot be cancelled or reversed. An annuity converts your pension savings into a regular guaranteed income for a fixed period of time, or for as long as you live. There are many different types of annuities, and several annuity providers. It is therefore important to shop around and use the open market option before making a commitment. An enhanced annuity plan is a type of annuity scheme, which can pay a considerably higher income to those who qualify.

Recent research shows that a high proportion of pensioners could be eligible for an enhanced annuity plan, but are simply not aware of this. Therefore, by signing on to an annuity plan that pays significantly lower income than they could receive with an impaired or enhanced annuity plan, many people lose out on thousands of pounds per year.

An annuity is one of the most important, and often the sole source of income during retirement. It is therefore vital to make sure that you are getting the best deal and optimising your pension savings through an annuity. There are simple ways to check if you could qualify for an Enhanced Annuity Plan, but first let’s understand what an enhanced annuity is.

An impaired or enhanced annuity plan is available to those who have a shorter than average life expectancy. Based on this, insurance companies can afford to pay more, since the expected term of the annuity is shorter than in a conventional case. Insurers use the applicant’s health condition and lifestyle habits to determine whether they are eligible for an impaired annuity.

Some common health conditions that qualify for an enhanced annuity plan are heart disease, diabetes, high blood pressure and obesity among others. Lifestyle habits include regular smoking. If you suffer from these or other health conditions or are a smoker, you may be eligible to receive a much higher income from your annuity than a conventional annuity.

An independent financial advisor can help you find out if you would qualify for an enhanced annuity. An IFA can also guide you through the pros and cons of each annuity type and help you make the right choice. You could also use a simple online tool available on many websites, to determine whether you qualify. Many annuity companies offer an enhanced annuity plan questionnaire or form to determine whether an applicant could potentially qualify for an enhanced annuity. The form generally consists of simple health and lifestyle related questions.

Fact is 60% of People Could Qualify for Enhanced Life Annuities?

Many consumers approaching their retirement years, if not most of them, choose to at least look in to the possibility of investing in an annuity to help fund their lifestyle once they have stopped working. For those who do decide upon purchasing an annuity, there are several different options available. Not only are there a variety of different types of annuities but there are also several enhancements and add-ons that can be attached to certain annuities. For many consumers, the sheer number of options available can make choosing an annuity incredibly challenging. This is why each consumer should consult with an independent financial adviser. Many consumers are missing out on several enhancements available to them, including enhanced life annuities, because they do not have all of the information necessary to help them make educated decisions on how they will fund their retirement years.

Enhanced annuities allow consumers to receive higher levels of income if they have certain life threatening medical conditions. These enhanced annuities operate under the premise that the insurer can pay out higher levels of income to these consumers because it is assumed that the medical condition(s) in question will shorten the life expectancy of the consumer. This allows the consumer to pay out for a much shorter period of time.

There are several advantages to investing in an enhanced life annuities, the first of which is the higher payout. Depending on the medical or health condition, consumers can receive up to 40% more than they would with other annuity purchases. The enhanced life annuity is not subject to fluctuations based on the markets or other investment conditions. Consumers do not have to partake in any regular or ongoing medication conditions. Therefore, consumers do not have to worry about their income decreasing if their health condition improves. Knowing exactly how much money will be received and knowing that it is guaranteed and will never decrease allows the consumer to budget for their future. This budgeting can be for every day or every month expenses or it can be to anticipate a large life purchase or to pay down debt.

There are very few disadvantages to purchasing an enhanced life annuity. The first of these is that the consumer must explain their applicable medical and health conditions. Therefore, there is far more personal disclosure necessary to purchase an enhance life annuity than is the case for a standard annuity. The only other disadvantages associated with an enhanced life annuity are those that are associated with all annuities. These include that annuity payments may not keep up with the increased cost of living. It is also impossible for a consumer to vary their income payments once they have already agreed upon the annuity logistics. For any consumer who has a very short life expectancy, it may be better for them to invest in another form of retirement investment such as enhanced equity release, income drawdown, phased drawdown, and phased retirement. This would better equip the consumer to maximize all of their death benefits while receiving the highest level of income possible for their unique situation.

No matter what the choice by the consumer, consulting with an independent financial adviser should be the first action taken when deciding how to invest in retirement. With so many options available, many consumers are ill-equipped to make the right decision for their personal situation. Secondly, they may not even know all of the options available to them. That accounts for why so many consumers are inadvertently bypassing the possibility of qualifying for an enhanced annuity.

Read the Latest Tips and Tricks with an Annuity Guide

As consumers approach their retirement years, they can spend a great deal of time and energy on determining exactly how they will fund their lifestyle after they have ceased working. For many, this means investing in some kind of annuity with the savings they have deposited in their pension pot. However, this is not the only option available to consumers and even if it were, there are several different types of annuities, all of which offer different options to consumers. With consumers having very different and unique situations, it is important that the consumer chooses wisely when purchasing any kind of investment, including an annuity. Consulting with an annuity guide can be a solid and reliable way for consumers to get the information they need in order to make an educated guess on the financial well-being of their retirement years.

An annuity guide can offer an objective opinion to most consumers. Each consumer has a unique lifestyle and certainly has unique needs.  While asking family and friends for opinions and advice can be worthwhile, consulting an annuity guide can be far more objective and can lay out most of the facts related to purchasing an annuity. It can often be a more reliable resource when trying to decide how to invest in retirement.

An annuity guide has other benefits as well. For one, it can be the most updated version of information available on the current market. That means that it allows consumers to stay current on everything affecting annuities at any given time. This means that consumers are able to make decisions based on accurate and up-to-date information. Using more than one annuity guide can also be helpful to consumers and can provide them with all of the information they may need when choosing the right annuity for their particular situation. With so many annuities available and on the market, it is crucial for consumers to get all of the information they can in order to make their most educated guess on choosing the right annuity for their particular situation.

There are several factors that go in to determining which annuity is the right choice to help fund retirement, or if an annuity is the right choice at all. An annuity guide can help consumers to make the most educated guess for their unique situation. Consulting more than one annuity guide can give consumers more than one objective view on annuities.

Which Retirement Annuity is Right for You?

Consumers have a variety of options available to them as they approach their retirement years. Not only do consumers have to choose between different investment strategies, but within those strategies lie another series of options available to the consumer. This is especially true when it comes to retirement annuities, a very popular option for many consumers. Retirement annuities offer several unique benefits to the consumer. However, there are several different annuities from which to choose, which can present a challenge to the consumer as they choose between their options. Each retirement annuity offers unique advantages to the consumer and with so many options there is one available for every unique consumer situation

Conventional Annuities

Conventional annuities work best for those consumers who are most focused on stability. This retirement annuity guarantees a level of income for the rest of the consumer’s life, regardless of any performance in the financial markets.

Variable Annuities

Variable annuities are a form of the retirement annuity that works best for those consumers interested in taking a risk. These income payments are typically lower than a conventional annuity but can pay out higher return as they are linked to investments in the financial markets.

Investment-linked Annuities

This retirement annuity is linked to specific underlying investments and can offer large payments to the consumer. Similar to variable annuities, this type of retirement annuity is a best fit for those consumers who are willing to take a risk with their retirement and pension savings.

Enhanced Annuities

Enhanced Annuities are a very unique kind of retirement annuity. This annuity is perfect for those consumers who are looking to take advantage of a higher annuity payment, based on their health or lifestyle status. This retirement annuity does require a specific eligibility requirement but can be worthwhile the assessment process for those who qualify, as payments are  usually increased since the insurer assumes that given the health condition, the consumer will have a shortened lifespan.

Fixed Term Annuities

Consumers who are looking for some more flexibility with their investment will benefit from a fixed term annuity. This retirement annuity offers a set income amount over the course of a predetermined period of time. This retirement annuity allows the consumer to budget for the period of time in which they are receiving payments, without having to worry about any impact from the financial markets, as the income is guaranteed for the predetermined time period.