Enhanced Life and Special Situation Annuities – A Guide

When you reach retirement age it is common practice to purchase a pension annuity.  An annuity will convert your pension fund into a regular income that will be paid to you for the rest of your life.  There are many different types of pension annuities available to UK consumers.  One such type of policy is an Enhanced Life Annuity.

Enhanced life annuities are intended for people that due to ill health have a reduced life expectancy.  Individuals that have a known medical condition may apply for higher annuity rates since the length of time in which the annuity is expected to payout is shorter.  Types of illness that may qualify you for enhanced rates include malignant cancers, heart disease, lung disease and Alzheimer’s.  You may also be offered enhanced rates based on your lifestyle of physical condition.  For example, smokers and the clinically obese may qualify. When applying for an annuity of this type you will usually need to prove your medical condition.  This can be done through a General Practitioners Report.

Similar to enhanced life annuities are Special Situation Annuities.  You may apply for special situation rates based on factors including your occupation and where you live.  For example, a builder in Liverpool may be offered higher rates than a stockbroker in Surrey due to their probable life expectancy.

The open market option means that you are not required to purchase your annuity from your pension provider instead you are free to look around for the best rates. The higher rates offered in an enhanced life or special situation annuity means that it is always worth finding out if you do qualify for one.  If you do qualify for this type of policy then it can a good way to maximise your return on your pension fund.  Research has shown that on average enhanced life annuities pay out 20 percent more than standard lifetime annuities.