Believe it or not, those with serious illnesses are offered higher retirement incomes than healthy individuals.
Unlike life protection policies, "impaired life" annuities provide better income levels in retirement for those with medical conditions that are likely to shorten their lives.
Why? A typical 65-year-old can expect to live approximately 15 years. But a 65-year-old who has had heart surgery or a cancer diagnosis may have a much lower life expectancy and therefore a lower number of annuity payouts. When it comes to buying a regular annuity product, it's a case of one size fits all. So, whether you live five months or 20 years, you will receive the same income from your pension.
Although annuities are no longer a compulsory purchase for many individuals, there are more options available within annuities following liberalisation of retirement regulations.
Coyle Hamilton's Mr Kieran Kelly said: "Annuity products were untouched for 20 to 30 years, but because of the new flexibility in pensions, there is demand for improved annuity products." An annuity uses a lump sum to provide lifetime income with no investment risk.
Up to 10 per cent of those retiring may qualify for impaired life annuities. At the moment, Norwich Union is the only major life company offering this product. It does not cost any more than a standard annuity. Both the self-employed with personal pension plans and employees of company pension schemes may qualify.
When Norwich Union sets an impaired life annuity rate, each individual's medical history and current prognosis is assessed and then reflected in the terms offered.
For example, a single life annuity for a male aged 60 with heart disease may receive a 40 per cent increase in the payout.
If the condition is cancer, the annuity may increase by 84 per cent. The corresponding increases for women with these conditions are 53 per cent and 102 per cent respectively. However, every case is assessed individually.
Similar to the standard annuity, a "joint life" rate is significantly lower than a "single life" annuity rate.
Lifestyle annuities are gaining popularity in Britain. Evergreen Retirement Assurance, a subsidiary of the British-based Britannic group, has just introduced three enhanced annuity products aimed at those with particular lifestyle related health problems. Among those to benefit are smokers, the overweight, sufferers of chronic asthma, high cholesterol or high blood pressure.
No doubt these products will be offered here shortly as competition in the annuity market intensifies.
