| |
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.
|
Gross income |
| |
Smoker
enhanced annuity |
| |
Standard
highest annuity |
| |
Standard
lowest annuity |
|
|
| 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 |
|
Gross income |
| |
Diabetes enhanced annuity |
| |
Standard
highest annuity |
| |
Standard
lowest annuity |
|
|
| 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 |
|
Proportion |
|
37.0% |
|
24.0% |
|
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.
|
Gross income |
| |
Impaired health annuity |
| |
Standard
highest annuity |
| |
Standard
lowest annuity |
|
|
| 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. |
