False Hope for those approaching Retirement


Any hopes that the slow and steady rise in government gilt rates (the rate that determines the annuity rates offered to retirees) would continue for the foreseeable future were delivered a hefty blow by a statement issued by the new Bank of England Governor, Mark Carney.

The statement signalling that interest rates would not rise from the current rock bottom levels anytime soon sent gilt levels tumbling back to historic lows.

Couple this with the information that retirees are the demographic group experiencing the highest levels of inflation due to high food and energy costs and it is hard to see the sliver lining on this darkening cloud.

Ray of Hope

So what can those approaching retirement do to ensure they are receiving the highest level of income possible ? The answer: shop around, exercise your open market option and most importantly receive independent advice.

Annuities – Retirement Advice

For those requiring a pension annuity factoring in medical, health and lifestyle factors can significantly increase the level of pension income . Individuals do not have to be in serious ill health to qualify for an increase in income. If you smoke, are overweight, regularly drink alcohol or take prescribed medication you could increase your pension income. It is estimated that 70%* (*MGM Advantage) of the UK population would qualify for an increased pension income.

Below shows the average increase in pension income levels that you may experience from some of the more common medical conditions:

Condition% Increase
Heart Disease33%
Diabetes & a smoker36%
Heart Disease & overweight36%
Cancer & High Alcohol Consumption39%
Stroke & High Blood Pressure/High Cholesterol26%

Source: just retirement enhanced annuity swingometer

Above covers just a handful of medical conditions which are covered but there are many more.

A 39% increase in the level of pension income would increase a typical standard annuity rate of 5.90% (currently being offered in the marketplace) to 8.20% ( a rate which has not been offered by standard annuity providers since the late 1990’s).

What does this mean in monetary terms?

For every £1,000 of income to be received from your pension plan you could increase this by between £210 and £390 per annum.

For example: Mr A is aged 65 and has a pension pot valued at £30,000 (after tax free cash), his current provider has quoted a pension income of £900 per annum. He suffers with Diabetes and is a smoker, he decides to receive Independent Financial Advice about his pension income options. After factoring his medical conditions the adviser manages to secure him a fixed income of £1,224 per annum. An increase of £324 per annum for the rest of his life.

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