Research by Watson Wyatt indicates a 35% jump in Enhanced Annuity sales from 2006 to 2007.
Enhanced Annuities provide people with serious medical conditions the chance to obtain much improved annuity rates - and therefore a much better pension from their accumulated fund.
The bottomline is that if you’re likely to die earlier, the providers are happy to pay you more during the shorter period you’ll be living.
By answering a few simple questions about health and lifestyle, it can make all the difference to a pensioner’s finances.
Key to this is the customer using their right to an Open Market Option [the 'OMO'] at retirement to shop around for a better deal than the standard rates offered by their pension scheme provider.
Watson Wyatt estimate 40% or more of the retiring population can benefit from enhanced rates. For acute and terminal situations Impaired Annuities are even more beneficial. In 2007 20% of annuities sold were enhanced.
Standard annuity providers are now being left with an increasingly healthy book of annuitants with a long and expensive retirement ahead of them. These firms must therefore start looking at the reality of their rates and are likely to jump into the enhanced market themselves to sure up returns.
This market is currently supplied by only 8 companies.
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