Three quarters of over-55s unaware of enhanced annuities

Retirees may be missing out on thousands of pounds in pension income by not disclosing health conditions or lifestyle choices when buying an annuity.

Research by Legal and General found that as many as three quarters (76%) of over-55s believe that disclosing such details when purchasing an annuity would decrease the rates offered by an annuity provider.

In fact, it could actually increase the money you get.

An annuity is an insurance policy that pays out a guaranteed income until you die, in exchange for some or all of your pension pot.

People with pre-existing medical conditions and lifestyle habits such as smoking and drinking alcohol can apply for an enhanced annuity, which pays a higher income for those with a lower life expectancy.

Since pension freedoms were introduced, giving people more choice over what to do with their retirement savings, annuities have become less popular.

Confusion about the product could be affecting uptake, as just under half of the people surveyed (49%) said they had heard of annuities and only one in four (26%) respondents who are retired said they have an annuity.

Emma Byron, managing director at Legal & General retail retirement income, said: “Customers are confused about how annuities work. People with health conditions, as well as smokers and drinkers, stand to benefit from better annuity rates — but only if they disclose everything to their financial adviser or annuity company. First and foremost, we need to help customers to understand the potential benefits of annuities, which offer them a guaranteed income for life in retirement.

“Part of that is about education and information — but it’s also important that our industry talks plainly to consumers, removing the jargon and explaining the options available in a clear and helpful way. Just 26% of retirees have taken out an annuity, but there are thousands more who could benefit from a guaranteed income in retirement.”