If you are reaching the age at which you are planning to start taking benefits from your personal pension or executive pension arrangement you must take specialist independent advice.

Having paid into a pension arrangement for a number of years you could be forgiven for thinking that your pension planning days are over. They aren’t!

Hopefully you will have benefited from above-averageinvestment growth in the past, but even if this is the case you must be aware that you need not stay with the same insurance company when you want to turn your fund into an annual income (i.e. an annuity).

Insurance companies offer very different annuity rates. In a recent survey by The Pensions Office one insurance company offered an annuity almost 15% better than the tenth best offer from another leading insurance company. Some companies surveryed offered rates at more than 20% lower than the leading company.

But there’s more!

Some insurance companies offer enhanced annuity rates for what are often termed ‘impaired lives’. Put simply (and crudely, I’m afraid), ‘impaired lives’ are people who the insurance companies consider to be statistically likely to die sooner than a person in average health. People with annuities who die soon after the annuity starts to be paid make the annuity provider (i.e. the insurance company) a lot of money. In effect, they ‘subsidise’ people who live a long time. Some insurance companies accept this unfairness and offer better rates to these ‘impaired lives’.

So, just how poorly does someone have to be to ‘qualify’ for enhanced rates?

Not as much as some people might think. You don’t even have to be poorly to qualify, in some cases. Smoking cigarettes is sometimes sufficient. A touch of serious alcoholism might also work. Overweight could help also. Living in an area with a high death rate might help you also (Hello, Glasgow!).

More seriously (although all of those comments are actually true), qualification for impaired life annuity rates does not usually rely on serious ill health; just being in relatively ill health often suffices.

In any case, The Pensions Office considers alternatives to conventional annuities for all clients, and those in ill health might be better to consider one of those alternatives.

Not sure what to do?……….