A study of 759 individuals by Hargreaves Lansdown found 70 per cent of those aged over 55 were not aware health and lifestyle factors, such as smoking and diabetes, could enhance annuity quotes.
Kay Ingram, director of public policy at LEBC, said: "The average enhancement is made up of wide ranging levels of additional income on offer and even those with no health issues can get an uplift of 8.36 per cent just by shopping around as this is the difference in the income offered by the lowest and highest offers for a 65 year old in good health.
"Lack of awareness of enhanced terms and their availability may also be due to advisers who are not specialists in this market not understanding the medical conditions with which their clients present or not asking the right questions to find out more."
In 2018, over half (56 per cent) of the open market annuities arranged by Hargreaves Lansdown were enhanced for either health or lifestyle, with the average uplift over the past year being 13.59 per cent.
"Buying an annuity, where you exchange some or all of your pension pot for a regular guaranteed income, is still one of the only ways to ensure you won’t run out of money in later life,” said Nathan Long, senior analyst at Hargreaves Lansdown.
“We’re used to any ailments or bad habits costing us more when we buy insurance policies, but the opposite is true when you apply for an annuity. Even if you plan to keep your pension invested and use drawdown, getting an annuity quote can make sure you are making a fully informed decision.”
The Financial Conduct Authority has also expressed concerns about the sale of enhanced annuities - particularly among non-advised consumers.
It introduced rules forcing providers to direct consumers to an annuity comparison tool after a thematic review of non-advised annuity sales found that where providers did not sell enhanced annuities, they did not always inform customers of this or even mention these products even if the customer was eligible for one.
Almost half (49 per cent) of all enhanced quotes included smoking, with around a quarter (24 per cent) including high blood pressure and high cholesterol.
Common conditions for enhanced quotes also include cancer, strokes and respiratory and heart conditions among others.
A stroke can boost an annuity by 25 per cent compared to a 14 per cent boost for diabetes or nine per cent for a person who smokes ten cigarettes a day.
“Where there are a combination of medical and lifestyle factors likely to affect the individual’s longevity the increase in income can be 50 per cent more than a healthy person. Better fact finding which asks about previous as well as current history and also probes the exact medication being taken can often result in a significant increase in the lifetime income available,” explained Ms Ingram.
amy.austin@ft.com
