The benefits of being sick

Aimee Steen

Life used to be simple in annuities. You’d reach retirement, be offered a market-poor but pretty reasonable looking annuity rate from your provider (all rates look okay-ish when gilts are doing well) and swan off into retirement.

Today, rates are dreadful. Not just rates from pension providers looking to keep some cheap customers on their books with dire internal rates until they pop their clogs; genuinely market-competitive annuity providers are struggling to produce incomes worth writing home about.

And so, the great solution: enhanced annuities. If you’re lucky enough to have only a few years left when you reach retirement, chances are you can get an enhanced annuity from somebody and a few extra quid to enjoy while you last.

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Specialist providers such as Just Retirement and Partnership have been banging the drum about this for years, but now more providers are jumping on the bandwagon. Scottish Widows is the latest entrant, adding the product to its existing conventional offering.

Is it all down to the goodness of their hearts? Well, probably not. More likely it is the result of a kick up the backside from the ABI, forcing pension providers to point out that customers might be eligible for an enhanced annuity. That makes for an uncomfortable conversation in the marketing team if a pension provider doesn’t offer one.

There are very few circumstances in which it pays to be sick. As the public wakes up to that fact that one of those circumstances is staring them in the face at retirement age, insurers will ramp up their caring, sharing image to get a slice of that business.