The overall market grew substantially in 2012 with around £4.5 billion going to annuities which take account of health and lifestyle compared to £3 billion in 20114. This continues the rapid increase in this market over the last 10 years, moving enhanced annuities from a niche product to a mainstream retirement income solution in a very short space of time. However, this hides a huge disparity in the market. Most people receiving a better income because of a health or lifestyle condition do so because they receive financial advice.
Where a customer buys an annuity through their existing pension provider, the number of customers who purchase an enhanced annuity is significantly lower, and yet these are the very people who are more likely to qualify for a better rate through the enhanced route.
Andrew Tully, pensions technical director, MGM Advantage said:
“It’s no surprise the enhanced annuity market continues to grow as people try to ensure they make the most of their hard earned retirement savings. We believe the majority of retirees should be taking their health or lifestyle into account when considering how best to turn their savings into a retirement income, yet many don’t, especially those who don’t receive financial advice.”
Andrew Tully continued: “For those who shop around more money now goes into enhanced annuities than conventional annuities. But where people don’t receive advice that figure is dramatically lower with only 4% of customers choosing the enhanced route. This illustrates the huge benefits advice can bring, not only in finding the best rate but helping people decide the most appropriate way to turn their pension pot into a lifetime income. It also shows the market isn’t currently helping consumers, especially those with smaller pots, as much as it should."
