Impaired Health; Annuity Rates Enhancement

This applies to both a pension impaired health annuity and purchased life annuity. In general, individuals that qualify for impaired life rates have a significantly reduced life expectancy (usually less than 5 years to live). It could be that a family have an elderly relative now in a nursing home with a serious illness and they want to protect the estate from the high costs, in which case they can consider an immediate needs annuity.

The leading causes of death in the UK are shown in the table below and therefore anyone who has survived or currently suffering from these conditions can be considered by underwriters for impaired life annuities. These causes of death in the UK account for 81.5% of all deaths for males and females that are over the age of 50 and are as follows:

Major causes of death in the UK
Condition	Proportion
Heart Disease	37.0%
Cancer	24.0%
Stroke	12.0%
Major Organ Failure (Lung, Kidney, Liver)	8.5%

When considering the income to pay an impaired life the insurance company should use a combination of mortality tables and underwriting guides developed from the mortality experience of impaired lives.

When underwriting an impaired life, some life companies may use the normal mortality tables and enhance the rates by assuming the annuitant is several years older than their current age, such as aged 70 rather than 65, thereby offering a higher income. However, this is not a satisfactory solution and some companies use the Anderton Mortality Tables that base the rates not only on the ageing process but also how the annuitant's life expectancy is going to be affected by the impairment.

Annuity rates table - Impaired Health

The following examples are for both male and female single and joint lives, suffering from advanced lung cancer with no spread. The purchase fund is £100,000 and assumes a pension annuity payable in arrears, with 5 years guarantee, no escalation no proportion and for joint lives a survivors pension of 50%.

Male age 60
Impaired health rates	£15,028
Standard rates	£6,620
Male age 65
Impaired health rates	£15,050
Standard rates	£7,390
Annuity table - the annuity rate shown above is based on a purchase price of £100,000 and should be used as a guide only. For an annuity rate specific to your circumstances you s should ring 01480 451412 for an immediate quote.

  

Female age 60
Impaired health rates	£15,009
Standard rates	£6,500
Female age 65
Impaired health rates	£15,090
Standard rates	£7,080
Annuity table - the annuity rate shown above is based on a purchase price of £100,000 and should be used as a guide only. For an annuity rate specific to your circumstances you should ring 01480 451412 for an immediate quote.

  

Joint both age 60
Impaired health rates	£8,345
Standard rates	£6,300
Joint both age 65
Impaired health rates	£8,853
Standard rates	£6,970
Annuity table - the annuity rate shown above is based on a purchase price of £100,000 and should be used as a guide only. For an annuity rate specific to your circumstances you should ring 01480 451412 for an immediate quote.

 The income from the impaired life annuity for a single male or female would provide a gross income of more than 2 times that of a standard annuity, payable for the whole of his life. The joint annuity improves the rate by at least 25%.

Impaired Health - Lump Sum

Alternatively an impaired life could be used to buy a purchased life annuity. For example, the family of an elderly mother of 80 years suffering from dementia may want to supplement her income. The family have realise a surplus of only £50,000 from the sale of a property and want to purchase an annuity payable in arrears, with no guarantee, without proportion or escalation and no dependents income.

Purchased Life Annuity
Annuity Type	Gross Income
Impaired Health Annuity	£26,010
Standard Highest Annuity	£6,970
Annuity table - the annuity rate shown above is based on a purchase price of £50,000 and should be used as a guide only. For an annuity rate specific to your circumstances you should ring 01480 451412 for an immediate quote.

The income from a £50,000 annuity purchase for the impaired life annuity would provide a gross income 3.7 times greater than a standard annuity, payable for the whole of her life. The capital could be used for a purchased life annuity or it could be used for an immediate needs annuity if the elderly mother had to be admitted to a nursing home to receive 24 hour care.

Medical conditions
An individual may have suffered from a number of medical conditions in the past or at present that could mean he or she can qualify for an enhanced or impaired life annuity. Some of the conditions for enhanced rates are as follows:

It may be necessary for the annuitant to have more than one of the above conditions before an enhancement is offered.

The following table shows conditions required for the higher individual impaired rates:

Medical Conditions for Impaired Rates
Secondary malignant cancers	Some primary malignant cancers
Chronic Lung Disease	Stroke with ongoing support needed for normal daily living
Motor Neurone Disease	Parkinson's Disease
Chronic heart disease	Kidney disease with ongoing dialysis
AIDS	Multiple Sclerosis, permanent wheelchair support required
Hodgkin's Disease	Alzheimer's Disease

This list is not exhaustive and when making an application for an enhanced or impaired health annuity it is important to state all medical conditions in order for the pension income to reflect the expected reduction in the annuitants life expectancy.

General Practitioners Report

Where the annuitant suffers from ill health and is applying for an enhanced or impaired life annuity, it is common practice for the insurance company to request a General Practitioners Report (GPR). They do this to ensure that the details given in the application form are correct before paying the annuitant an income.

When people are younger and applying for life assurance the underwriters could find reason in the GPR to load the premium (increase) if they feel that your medical condition creates a higher risk, and this works against the individual.
However, with an enhanced or impaired life annuity the worse the medical conditions the higher will be the income paid to an annuitant. Where the individual is uncertain of the details of a medical condition because it occurred a long time ago, a GPR can clarify to the underwriters its severity.

Contact us today for a free annuities enhancement consultation