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A man was able to secure an extra £6,300 over 10 years by describing his health conditions. New research has shown pension annuity incomes can improve by significant amounts if people disclose health and lifestyle conditions.
Providing information about existing health conditions may seem counterintuitive to securing a higher income – but according to Canada Life, this can help.
Canada Life shared the story of a 65-year-old man named Richard, who had been saving for retirement.
Richard has secured a pension pot of £100,000, and had been looking for an annuity.
The group explained a standard annuity would secure Richard £4,800 per year.
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However, Richard is also a smoker, and by declaring this to Canada Life, it could work in his favour.
By informing the organisation of this, Richard can secure £450 per year more, totalling £5,250 per year.
By telling Canada Life he is 19 stone, Richard receives £110 more income a year – £5,360.
Finally, by revealing to Canada Life he has type 2 diabetes on treatment, Richard gets £70 per annum more.
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This totals £5,430 – £630 a year extra guaranteed income for life.
Disclosing a relatively common combination of smoking, higher BMI and type 2 diabetes could result in a customer receiving £6,300 extra income over 10 years on a £100,000 annuity.
Nick Flynn, retirement income director at Canada Life, said: “Annuities are back in vogue following a strong year of rate improvements.
“But the conversation around disclosure is still key in ensuring clients secure the best possible income.
“Health and lifestyle play a crucial part in annuity providers calculating the best rate, so it is incumbent on the client and their adviser disclosing the full set of medical facts to providers.
“Only then can we, as annuity providers, give the client the best possible outcome by way of income.”
There are pros and cons when it comes to buying an annuity, which Britons will want to consider.
Firstly, annuities offer 100 percent secure lifetime income, which means people do not have to rely on the stock market.
However, if people do want to combine annuities and drawdown, they can do so, as a purchase of an annuity doesn’t have to be an ‘either/or’ decision.
Another benefit to an annuity is that guaranteed periods and value protection is often available at a modest cost.
But with an annuity, income is fixed and offers no flexibility, which can be a key drawback.
In addition, if a person dies “early”, their estate might not get their money back, unless the right protections are in place.
Mr Flynn stressed annuities can often play a vital role in “any holistic retirement plan”, but that Britons should always shop around for the best rate.
However, he urged people to seek guidance, as this can be a major life decision.
Mr Flynn added: “Seeking advice will ensure you secure not only the best rate, but also the right shape annuity for your individual circumstances.”
