Enhanced and Impaired-Life Annuities

What is an annuity?

An annuity is where you exchange a lump sum of money for an income payable for the rest of your life. This can be either a lump sum of money from your savings (Purchase Life Annuity) or from your pension plan (Compulsory Purchase Annuity). The rate of return you will get will generally depend your age, sex and the annuity rate set by the provider. However, there are circumstances where you may be eligible for enhanced or impaired-life annuities, thus giving you a higher income.

At least one in three of us could be eligible for a higher income when we retire. All you have to do is buy a type of annuity that pays out a higher income if you're in a poor state of health. The trouble is that most of us don't realise it.

An enhanced annuity works on the basis that you will have a shorter life-span than someone in a better state of health - essentially using up your pension fund more quickly by giving you access to more money each year.