Enhanced annuities and impaired annuities

One option to turn a pension pot into an income in retirement is to purchase an annuity when you retire.

If you have a health condition, or certain lifestyle factors such as being a smoker or overweight, you may be able to get a higher rate (level of income) by purchasing an enhanced annuity.

More serious conditions may make you eligible for an impaired annuity. The lower the average life expectancy for someone with your condition, the higher the income you’re likely to get, because the provider expects to pay out for a shorter period of time.

Remember that an annuity is no longer your only option when you retire: read our guide to alternatives to an annuity for more information.

Will I qualify for an enhanced annuity?

In addition to smoking, the following conditions may qualify you for an enhanced annuity:

  • Diabetes
  • High blood pressure
  • High BMI

Other conditions such as asthma, high cholesterol and rheumatoid arthritis can also qualify, depending on the severity of the condition.

Will I qualify for an impaired annuity?

The following are examples of more serious conditions that might qualify you for an impaired annuity rate:

  • Heart disease
  • Major organ failure
  • Cancer
  • Parkinson's disease
  • Strokes

Even if you are healthy, you may qualify for an enhanced joint annuity if your partner suffers from one of the conditions above.

How do I apply?

Buying an annuity to generate an income in retirement is a big decision, so you should consider taking financial advice before you do.

When you apply for an annuity, your life expectancy will be assessed using a ‘common quotation form’ which is usually completed by an adviser and sent to all the annuity providers you're looking into. You only have to complete the form once, and your adviser will send a copy to each provider.

To qualify for an enhanced or impaired annuity you may need supporting evidence from your doctor, but you usually won't need a medical examination.

You should be completely honest with providers about the severity of your condition, and remember that if your health deteriorates after you make your purchase the annuity your income won't increase.

You don't need to take the annuity offered to you by your pension provider; you could get a much better rate by shopping around.

Last updated: 03 June 2015