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  Smoker enhanced   Impaired health
  Diabetes enhanced   Medical conditions
    
    

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Smoker enhanced
It was not until 1995 that the traditional practice for pension annuities was expanded to include enhanced rates for people with slightly reduced life expectancy due to specific medical or lifestyle conditions. Although your employees may be very healthy today, due to these factors their life expectancy is less than that of the normal mortality.

The first enhancement was for smoker rates. As members of the money purchase scheme, if your employees smoke 10 or manufactured cigarettes per day and have done so for the past 10 years, they could receive enhanced rates from a life company. If after being accepted on the enhanced terms the employee gives up smoking, the pension income will still continue at that rate for the rest of the employee's life.

The following pension annuities table is for a 60 year old male employee, showing the best smoker enhanced open market option income for a compulsory purchase annuity, from a money purchase pension fund of £100,000, after the tax free lump sum has been taken and on a level basis. The annuity is paid in arrears on a single life and does not include a guaranteed period.

Smoker enhanced annuity
  Annuity type
Gross income
  Smoker enhanced annuity
  Standard highest annuity
  Standard lowest annuity
£6,670
£6,160
£5,560
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 annuities specific to your employees circumstances, please complete the free annuity quote.


The income from the smoker enhanced annuities would provide your employee a gross income 2.5 times greater than a standard annuity and 3 times greater than the lowest rate payable for the whole of his life. It is estimated that up to 40% of employees in the workplace could qualify for enhanced rates, including smoker rates and diabetes rates. Before making a decision regarding a pension income, learn more about annuities, compare annuity rates and secure a personalised annuity quote offering guaranteed rates.


Diabetes enhanced
Following the introduction of the smoker enhanced rates, in 1996 life companies introduced other common life style and medical conditions such as diabetes that have seen an increase in occurrence in the UK population. It is likely that a number of your employees retiring have diabetes and could benefit from higher annuity rates.

There are different types of diabetes that carry different risks and this affects the enhanced rates offered. the three categories are as follows:

Diabetes controlled by diet;
   
Non insulin dependent diabetes;
   
Insulin dependent diabetes.

The highest risk is insulin dependent diabetes as this can result in related diseases of the kidney, eyes, heart and poor circulation. There are also degrees of insulin dependent diabetes requiring the individual to take insulin between one and four times a day, or more in extreme cases and this coupled with other medical conditions can decrease life expectancy and therefore increase the annuity rates offered by life companies.

The following pension annuities table is for a 60 year old male employee, showing the best diabetes enhanced open market option income for a compulsory purchase annuity, from a money purchase pension fund of £100,000, after the tax free lump sum has been taken and on a level basis. The annuity is paid in arrears on a single life and does not include a guaranteed period.


Diabetes enhanced annuity
  Annuity type
Gross income
  Diabetes enhanced annuity
  Standard highest annuity
  Standard lowest annuity
£7,110
£6,160
£5,560
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 annuities specific to your employees circumstances, please complete the free annuity quote.


The income from the diabetes enhanced annuities would provide your employee a gross income 2.5 times greater than a standard annuity and 3 times greater than the lowest rate payable for the whole of his life.


Impaired health
This applies to both a pension and purchased life annuity. In general, your employees that qualify for impaired life rates have a significantly reduced life expectancy (usually less than 5 years to live). It could be that the employee had to stop working due to illness and the company's group permanent health insurance (PHI) has being paying the employee a reduced income benefit to the schemes normal retirement age.

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 health 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 employee 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 employee's life expectancy is going to be affected by the impairment.

For example, take a male employee aged 60 suffering from advanced lung cancer with a money purchase pension fund of £100,000. The following table assumes a pension annuity payable monthly in arrears, with no guarantee, no proportion or survivors pension and no escalation.


Impaired health annuity
  Annuity type
Gross income
  Impaired health annuity
  Standard highest annuity
  Standard lowest annuity
£17,250
£6,160
£5,560
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 annuities specific to your employees circumstances, please complete the free annuity quote.


The income from the impaired health annuities would provide your employee a gross income 2.5 times greater than a standard annuity and 3 times greater than the lowest rate payable for the whole of his life.


Medical conditions
If your employees have suffered from a number of medical conditions in the past or at present it could mean he or she can qualify for an enhanced or impaired health annuity. Some of the conditions for enhanced rates are are as follows:


Medical conditions for enhanced rates
  Regular cigarette smoker
  Heart Attack
  Multiple Sclerosis
  High Blood Pressure
  High Cholesterol
  Digestive or Bowel Complaint
  Dementia
  Diabetes
  Chronic Asthma
  Stroke
  Cancer - lung, brest, bowel, pancreatic, liver
  Overweight
  Bladder or Liver Complaint
  Empysema


It may be necessary for the employee 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 lists are not exhaustive and when making an application on behalf of an employee for impaired health annuities, it is important to state all medical conditions in order for the pension annuity income to fully reflect the expected reduction in the annuitants life expectancy.
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Single
  55 £4,206  
  60 £4,699  
  65 £5,433  
  70 £5,983  
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  55 £3,946  
  60 £4,438  
  65 £4,954  
  70 £5,409  
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