Asuransi Indonesia: Boost your pension by 40 per cent

Naphtalia Loderick, 27 Jul, 2011

Money protected by an umbrella If you’re about to turn your pension fund into an annuity but don’t declare any health problems, you could be leaving yourself short of cash. We explain why.

Thousands of people every year leave themselves short of cash in their old age by failing to disclose their full medical history when they turn their pension savings into retirement income.

Unlike life insurance, where disclosing medical illness will see your premium bumped up, when it comes to pensions, declaring health problems, no matter how big or small, is likely to result in a higher retirement income.

This is because you are likely to be entitled to an enhanced annuity. This type of annuity pays out a higher income if you’re in poor health, because it’s expected that you will live a shorter life.

Guaranteed income

Your annuity provider is effectively betting on how long you’ll live and the income you receive is guaranteed.

Live longer than the annuity provider calculates and it takes the hit – you’ll receive your enhanced annuity for the rest of your life.

For many pensioners the difference in payout between a regular annuity and an enhanced one can be startling – up to a 40 per cent* difference.

Chris Griffiths, head of savings at Confused.com, says: “Unlike in the case of life insurance, where health problems cost you more in premiums, in the case of enhanced annuities health problems can mean a higher income in retirement.”

Up to 40% more payout

“This is because the companies providing the enhanced annuities make judgements about your life expectancy based on your health and lifestyle, which may be reduced when compared to the average.”Which illnesses are covered?

Enhanced annuities are not just for those with serious medical conditions. You may also qualify for this type of annuity due to your lifestyle choice – if you drink, smoke or are overweight for example.

When an annuity provider runs a quote for an enhanced annuity, they will consider all the factors that will affect your life expectancy, including where you live, whether you smoke and drink, your lifestyle and your medical history.

This helps them build a more accurate picture of your life expectancy on which they base their calculations.

Enhanced annuity provider Just Retirement estimates that 60 per cent of people at retirement may qualify for an enhanced annuity.

Seek advice

Once bought, annuities are for life and cannot be changed.

For this reason, it is important to seek independent financial advice if you’re thinking about an enhanced annuity to make sure that you do not miss out on any money in retirement.

*40 per cent increase is achieved by comparing the standard annuity rate against the best enhanced rate (example enhancement presumes person has medical conditions and smokes) based on a 65 year old man with a £30,000 pension fund sourced on 07/02/2011.

Topics: Plan for the future Tags: Pensions, Savings Confused Topics Get motoring Property market Deal with debt Plan for the future Smarter spending Get wealthy Travel & holidays Shrink your bills Your consumer rights Naphtalia Loderick

Naphtalia Loderick reports on all things personal finance at Confused.com. She started out on a weekly newspaper, via a national news agency and a stint in the fun but ‘not as glamorous as it appears on screen’ world of TV at the BBC researching consumer films for The One Show.

Asuransi Indonesia

Wednesday, October 19, 2011

Boost your pension by 40 per cent

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