Providing information about existing health conditions may seem counter-intuitive to securing a higher income – but according to Canada Life, it can help.
Canada Life told the story of a 65-year-old man named Richard who had saved for retirement.
Richard got a £100,000 retirement pot and was looking for an annuity.
The group explained that a standard annuity would guarantee Richard £4,800 a year.
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However, Richard is also a smoker, and declaring this to Canada Life could work in his favor.
By informing the organization of this, Richard can get an extra £450 a year, making a total of £5,250 a year.
By telling Canada Life he has 19 stones, Richard receives £110 more income per year – £5,360.
Finally, by revealing to Canada Life that he has type 2 diabetes under treatment, Richard receives an extra £70 a year.
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This totals £5,430 – £630 per year of guaranteed extra income for life.
Disclosure of a relatively common combination of smoking, higher BMI and type 2 diabetes could result in a client receiving an additional £6,300 over 10 years on a £100,000 annuity.
Nick Flynn, Director of Retirement Income at Canada Life, said, “Annuities are back in vogue after a solid year of rate improvements.
“But the conversation around disclosure is still key to ensuring customers get the best possible revenue.
“Health and lifestyle play a crucial role in determining the best rate by annuity providers. It is therefore the responsibility of the client and their adviser to disclose all medical facts to providers.
“Only then can we, as annuity providers, offer the client the best possible outcome in terms of income.”
There are pros and cons when it comes to buying an annuity, which Brits will want to consider.
First, annuities provide 100% secure income for life, which means people don’t have to depend on the stock market.
However, if people want to combine annuities and withdrawals, they can do so, because buying an annuity doesn’t have to be an “either/or” decision.
Another benefit of an annuity is that guaranteed periods and value protection are often available at a modest cost.
But with an annuity, the income is fixed and offers no flexibility, which can be a major drawback.
Also, if someone dies “prematurely,” their estate may not get their money back unless the right protections are in place.
Mr Flynn stressed that annuities can often play a vital role in “any holistic pension scheme”, but that Britons should always be looking for the best rate.
However, he urged people to seek advice as it can be a major life decision.
Mr Flynn added: ‘Seeking advice will ensure you not only get the best rate, but also the form of annuity that suits your personal circumstances.’