An enhanced annuity is a product you invest your pension into, specifically aimed towards people with medical conditions. You could invest your whole pot of pension money, or take out the tax-free lump sum (25% of your pot) first, and invest the remainder.
Some conditions are typically seen as a higher risk and may lead to a shorter life expectancy. These include:
- High blood pressure
- Heart attacks
Because of this, the amount an annuity provider is likely to pay could be considerably more. Other less serious conditions like asthma, obesity and high cholesterol could also contribute to a greater annuity payout depending on their severity.
Enhanced annuities work very differently to life insurance. With life insurance, the higher risk you are, the more you're likely to pay each month, but with an enhanced annuity, you're likely to receive a larger payout as your health condition could mean you have fewer years in which to receive payments. They've been developed to help people with medical conditions get the most out of their pension pot, keeping it as fair as possible.
If you're not sure if this is the right sort of annuity for you, why not take a look at our guide on annuity types.