Life expectancy is what pension providers use to decide the level of annuity rates they offer potential annuitants. This is because the insurer needs to know how much money they will have to pay out in retirement income. There are a number of factors that pension annuity companies take into consideration when judging someones life expectancy. These are: your age at the application stage, your lifestyle, current and past medical conditions (if any), geographic location, any smoking / drinking habits and of course, your gender. Women for example, on average live longer than men, so are offered lower rates when compared directly to a man.
If you would like to know in advance of applying for an annuity what your life expectancy might be, you might try a useful online calculator. The rule of thumb is that those with a lower life expectancy can expect better rates, as they are likely to live for a shorter period of time. If you retire at 55 and have are predicted a long life expectancy, such as a healthy and active woman living in the leafy suburbs, you could find your annuity income lower than is enough to support your desired living standards. If this case it may be better to delay an annuity purchase, delay retirement or find a away of supplementing you retirement income such as using equity release, where you sell a proportion of the equity in your home in exchange for cash lump sum.
