Enhanced annuities: preparing health information for a meaningful quote

Health and lifestyle information can affect the income offered when buying an annuity. An initial quote with those questions left unanswered may therefore be an incomplete starting point for your decision.

The useful preparation is to give accurate information, understand what the insurer has accepted and compare offers with the same benefits. A higher headline income does not remove the need to consider a partner, inflation or the pension benefits you would give up.

What makes an annuity enhanced?

An enhanced annuity takes account of relevant medical and lifestyle information when pricing guaranteed income. Hargreaves Lansdown's explanation describes information such as medical conditions, medication and smoking history that providers may consider. Eligibility and the difference in income depend on the insurer's assessment; there is no fixed increase for everyone with a particular diagnosis.

This is a pricing assessment, not a recommendation to change your lifestyle. Answer the actual questions honestly rather than trying to produce a particular quotation.

Prepare a factual health summary

Before completing a quotation questionnaire, gather the information it requests. This might include the names of diagnosed conditions, diagnosis dates, current medication and relevant treatment. Check uncertain details against your records rather than relying on memory.

Distinguish a confirmed diagnosis from a symptom still being investigated. If a question does not fit your situation, ask the provider or adviser how to record the answer. Keep a copy of what you submit and correct mistakes promptly.

Medical information is sensitive. Use the receiving provider's secure process. A general enquiry to an introduction service does not need a full medical history just to establish that you want help comparing retirement income options.

An illustration of the difference in pounds

Suppose two fictional quotations for identical benefits offer annual gross income of £6,800 and £7,300 after different underwriting assessments. The difference is £500 a year, approximately £41.67 a month before tax.

Over ten complete years of payments, the arithmetic difference would be £5,000, assuming the income remains level and both contracts pay throughout that period. This is not an available quotation, an expected enhancement or a prediction of anyone's lifespan.

The example simply gives a way to translate a quotation difference into a household budget. It does not establish which contract is suitable or whether purchasing an annuity is preferable to another pension option.

Hold the benefits constant

Ask for a comparison sheet with a row for each offer and columns for the pension amount used, payment frequency, income increases, survivor's income and any guarantee or value protection. Record whether charges have already been allowed for.

If one offer is single life and another continues income to a partner, the gap cannot be attributed solely to health underwriting. Similarly, a level income and an increasing income buy different payment patterns.

An adviser can show two separate comparisons: the effect of medical information on otherwise similar terms, and the effect of choosing different benefits. Keeping those questions separate makes the trade-offs easier to understand.

Check whether the quote is final

Find out whether an offer is indicative, subject to further medical evidence or ready for acceptance. Some insurers may request information from a GP or additional confirmation. Ask who will request it, how consent is obtained and whether you need to do anything.

Keep the quotation date and expiry date beside the income figure. A figure obtained earlier may cease to be available while evidence or a pension transfer is being arranged. Do not assume that an online estimate secures an income indefinitely.

Before proceeding, confirm which medical information the insurer has used and whether any outstanding answer could alter the terms.

Include the existing pension in the comparison

Ask the current pension provider about any guaranteed annuity rate or other valuable benefit attached to your policy. An enhanced open-market offer should not be treated as automatically better than a contractual guarantee without comparing the actual terms and eligibility conditions.

Also consider how much of the pension you intend to use. Committing the whole pot, committing part and retaining flexibility elsewhere can produce very different household plans. Health information improves the quotation process; it does not decide that allocation for you.

Useful preparation for a meeting includes the pension statement, existing guarantees, the completed health questionnaire and a budget showing essential spending. Choosing annuity advice, comparing drawdown and annuities and questions for a retirement adviser explain the wider discussion.