If you suffer a heart attack, money won't be at the forefront of your mind. But not many people know that waiting five years to retire instead of choosing to buy an annuity within a month of the event will hack a galling 10 per cent chunk off your pension - a loss of around £12,500 for someone with a £100,000 pot.
The enhanced annuity market, which serves around 40 per cent of retirees with fixed income, dishes out more generous deals for people with medical conditions and offers the biggest annual payouts to the people with the lowest life expectancies. This means heart patients are faced with a harsh 'retire now or pay later' system because the longer they survive after the attack, the better their prognosis for living longer becomes.
Choosing to retire is a huge, life-changing decision that you shouldn't rush into - but once you've had a heart attack, your pension becomes a ticking time bomb. Waiting just a few months to retire after a heart attack can damage your pension income. A 60-year-old with a £100,000 pot will be around £100 a year poorer for the rest of his life if he waits a year before retiring - which adds up to £2,500 over the course of an average retirement.
And after around five years, many heart patients will no longer qualify for an enhanced payout because if they are no longer dependent on medication, their life expectancy may be back to normal, says Jules Charrington, chief underwriter at MGM Advantage. "Your life expectancy is lowest the day after you have a heart attack and tends to improve from there, meaning the sooner you retire the better deal you get on your annuity."
Diabetics can retire richer, later
But where heart patients lose pennies with every tick of the clock, diabetes sufferers face the opposite fortune. Their life expectancy deteriorates along with their health and this means a fatter pension for every year they keep working.
A 60-year-old retiree diagnosed with diabetes 10 years ago with a £100,000 pot will line their pocket with £1,000 more every year than someone who is diagnosed in the year they retire. And if they were diagnosed five years ago, they can get an approximate £200 uplift on their annual payout.
But if you have a health condition, you don't want to have to plan your retirement around the annuity deal you could receive. Providers LV= and Just Retirement offer a solution that could help you - in the form of a fixed-term annuity - which, unlike regular annuities, allows you to break the 'lifetime' deal if you are diagnosed with a medical condition and apply for a higher rate.
The popularity of the non-standard annuities market was illustrated this week when provider Partnership Assurance announced plans to float on the London Stock Exchange. It is looking to raise £105m after costs to pay down debt and invest in the business.
See 'Partnership Assurance to float' for our full story on the initial public offering.
| Conditions | Age | JR Quotes | Best Standard | Worst Standard | % Improvement - best standard compared to worst standard | % Improvement - JR Enhanced Annuity compared to worst standard |
|---|---|---|---|---|---|---|
| Mini stroke 4 years ago, hospitalised, blood thinning medication taken daily | 65 | £2,865.84 | £2,913.00 | £2,518.44 | 15.7% | 13.8% |
| Epilepsy, occasional fits, frequent seizures and 2 tablets a day | 65 | £3,169.56 | £2,913.00 | £2,518.44 | 15.7% | 25.9% |
| Lifelong asthma, takes daily inhaler, type 1 diabetes, takes insulin daily, high blood pressure, cholesterol medication daily | 60 | £2,765.88 | £2,566.80 | £2,233.44 | 14.9% | 23.8% |
| Chronic kidney failure, end stage disease, daily medication, dialysis, hospitalised and waiting for a transplant | 65 | £3,629.16 | £2,913.00 | £2,518.44 | 15.7% | 44.1% |
| Heart-bypass operation 7 years ago, depression, used to smoke 30 per day gave up after heart-bypass operation, sleep apnoea and leg pain – claudication | 60 | £2,587.68 | £2,566.80 | £2,233.44 | 14.9% | 15.9% |
| Smokes 10 per day | 65 | £3,186.12 | £2,913.00 | £2,518.44 | 15.7% | 26.5% |
| High blood pressure and high cholesterol 1 medication for both conditions | 65 | £2,865.84 | £2,913.00 | £2,518.44 | 15.7% | 13.8% |
| Bowel cancer diagonised within the last six months, treated with surgery and radiotherapy | 60 | £2,892.24 | £2,566.80 | £2,233.44 | 14.9% | 29.5% |
| £50,000 purchase price, annuity paid monthly in advance, no escalation, 5 year guarantee period, NE49 9PZ post code, 1% adviser charge | ||||||
| Source: Just Retirement | ||||||
