Smoking could boost your annuity by 37%

If you want to get the best possible annuity, you must tell the truth about your health and lifestyle. We look at how big a boost you can get from different conditions and lifestyles.

At retirement age, many people have a pension pot that they use to buy a retirement income – normally an annuity. You can read more about how annuities work in Become a pensions expert in five days.

When you buy an annuity, it’s really important that you disclose all your health problems, as well as any lifestyle issues that may cause poor health in future, such as smoking.

That’s because insurers will pay a higher income to someone in poor health – after all, if your health is poor, you’re more likely to die at a relatively young age. These higher rate annuities are known as enhanced annuities.

We’ve written about enhanced annuities several times before on lovemoney.com, but I’ve now got more information on how big an uplift you can get from different lifestyle problems. Let’s take a look at some figures:

Annuity boost from different lifestyles

Source: Just Retirement

These figures are for a 65-year-old man with a £45,000 pension pot.

The uplift is the difference between the lowest-paying standard annuity and the best enhanced annuity for this man.  The uplift would be significantly smaller if you compared the best available standard annuity with these enhanced annuities.

Still the uplifts are very sizeable and they would be even more sizeable if someone could say that more than one lifestyle factor applied to them.

Here’s a case study which shows how combining different lifestyle factors can lead to a big accumulated uplift. Once again, we’re looking at a 65-year-old man with a £45,000 pot. He has no history of serious medical problems and he’s not taking any medication. But he can still get a decent enhanced annuity.

Here are the lifestyle factors that, in combination, boost his income:

Source: Just Retirement

As with the previous table we’re comparing against the lowest standard annuity the man could get. In this example, the man wouldn’t get 26% just for his weight on its own, he only gets that big an uplift because the other factors apply. 

What should you do?

When you buy an annuity it’s essential that you shop around between different providers. Don’t just take the annuity you’re offered by your pension provider. That will almost certainly increase your pension.

Then your next step is to see if you qualify for an enhanced annuity. So when you’re asked questions about your health and lifestyle, make sure you give complete answers and highlight every possible illness/condition and lifestyle.

Obviously, you shoudn’t lie; just make sure you provide all the relevant information.

A great place to start is lovemoney.com’s annuity calculator. It should help you get a basic idea of how big an annuity you can get if you shop around for an enhanced annuity.

Then from there, it makes sense to get advice from a good annuity broker such as Annuity Direct or Hargreaves Lansdown.

The broker will then put you in touch with an annuity provider who will sell you an annuity.

If you want to get an enhanced annuity, you’ll normally be asked to fill in a 23-page questionnaire called the Common Quotation Form. However, one annuity provider only asks you to fill in a shorter questionnaire.

As far as I’m concerned, it makes much more sense to fill in a longer form as you’re more likely to disclose conditions or lifestyle issues that could boost your annuity.

So shop around and make sure you fill in a very long form about your health!

More on retirement: 

Good news on annuities 

20 reasons pensions go wrong 

Check out lovemoney.com'sannuity calculator