A new survey taken on behalf of MGM advantage has found that more than three quarters of those aged 55 and over were unaware that they could potentially increase their retirement income through an enhanced annuity. These types of annuity are designed for people who have medical conditions or lifestyle choices that will impact on their life expectancy. So conditions/choices such as high blood pressure, diabetes, heavy smoking and heavy drinking can qualify annuitants for enhancement. This can lead to an increase in annuity rates of up to 40%, depending on how serious the condition is. The tragedy for the UK pension community is that most annuitants are not aware of these better annuity offers as they fail to use the (OMO) open market option – (shopping between pension providers for the best deal).
Given that around 60% of those over 55 actually have one of the pre requisites for annuity enhancement, it is unfortunate then that only one in five women and one in four men are aware of enhanced annuities. If you take a male with a pension fund of £50,000, he could boost his income by £3,824 over five years by using an enhanced annuity as compared with a conventional annuity.
Industry insiders have described the results as “shocking”. Many have long argued that the UK annuity system needs a thorough overhaul and that the default option offered to new retirees should be that they are compelled to shop around for the best deal. One bone of contention is the ‘wake-up’ packs sent to those approaching retirement. These offer advice over the various options open to retirees but have been criticised by some in the industry for not being clear enough about the benefits of the open market option (OMO).
