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.
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.