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Enhanced annuities are a type of the traditional conventional annuity.
In the same way as with a conventional or standard annuity, the company providing it takes on all the risk of providing you with a guaranteed income for life. However, enhanced annuities take into consideration detailed information about your health and lifestyle to provide you with a more personalised annuity quotation.
Qualifying for an enhanced annuity could mean a significant increase in your retirement income. Evidence has shown that compared to the lowest standard annuity, this could mean potential increases of around 20 per cent for minor conditions, around 30 per cent for moderate conditions and around 40 per cent (sometimes even higher) for serious medical conditions.
Based on these figures, if a standard annuity paid you £5,000 per annum, then a 40 per cent increase would be £7,000 per annum.
As this income will be paid for the rest of your life, then it is a significant amount extra. Whether you could receive more or less than this depends on the specific health or lifestyle conditions you have. It is estimated over 60 per cent of people at retirement may qualify for an enhanced annuity.
When an annuity provider quotes for an enhanced annuity, they will pay close attention to all the factors that will affect your life expectancy. This includes where you live, whether you smoke and drink, your lifestyle and your medical history. They can then build a more accurate picture of your life expectancy on which they base their calculations.
Unlike in the case of life insurance, where health problems cost you more in premiums, in the case of enhanced annuities health problems can mean a higher income in retirement. This is because the companies providing the enhancwed annuities make judgements about your life expectancy based on your health and lifestyle, which they factor into their calculations.
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested