Other conditions, including heart disease, lung disease and neurological diseases such as dementia, multiple sclerosis, stroke, kidney and liver disease, as well as depression and other affective disorders, are also taken into consideration. Conditions such as cancer or diabetes can have the biggest impact on providing a higher rate.
An enhanced annuity works on the basis that certain diseases and lifestyle choices will lower the life expectancy of the annuity holder, so they will receive a higher rate of income over the life of the annuity.
Many lifetime annuities can be purchased on enhanced terms, so it is important that you capture as much medical information as possible from your client.
It is also worth asking a client if they have ever suffered from a particular disease in the past or if they are currently effectively managing a condition through medication or treatment, as they may still qualify for an enhanced rate.
Essentially, clients should be encouraged to disclose their medical background, as they could find that they qualify for higher rates.
Fixed-term annuities
Another option for clients approaching retirement is to consider a fixed-term annuity.
This is a fixed-term contract that will pay a set amount of income over a chosen period of time. This can usually be anywhere from three years to around 40 years.
Your clients will have the option to choose the amount of income they want to receive, as well as the maturity value they want to get when the annuity term ends.
Choosing a higher income will reduce the maturity value, while a lower income will increase that lump sum figure. There is also the choice of no income, should your clients just want the benefit of accessing a lump sum being at the end of the plan instead.
The main benefit of a fixed-term annuity is that it is more flexible than a lifetime annuity. It allows clients to keep their options open and use the money for a range of possibilities, from managing their essential spending, to bridging an income gap until they draw on other assets.
Many fixed-term annuities also provide a cash withdrawal option, which allows clients to make a number of withdrawals from the annuity amount, during the lifespan of the annuity.
This is usually for a major lifetime event, such as a wedding or house purchase, and will affect the total lump sum received at the end of the annuity.
To do this, your client must take out a guaranteed minimum payment period that matches the term of the plan. If they do not, there is not an option to cash in or transfer the plan.
