"The best performing pension could produce more than three times more pension income than the worst performing one. The really bad news is that your pension fund is more likely to be amongst the bad than the good" The Observer
Annuity rates are calculated on the basis of a number of actuarial assumptions. These include an assumption of the life expectancy of the annuitant (i.e. the personal buying the annuity), the rate of investment return the actuary feels his company can achieve on the annuitant’s initial lump sum investment, and the charges (including profit) required or desired by the insurance company.
Shorter life expectancy would lead to a higher annuity payment (less years for the insurance company to pay) and this can unfortunately be shortened for people with a serious illness. A number of insurance companies will consider medical evidence to prompt a higher annuity payment.
So, if you are about to draw your pension benefits and currently suffer a serious illness, is it worth the effort? Or might you favour the usually-enhanced death benefits from income drawdown?