15 April 2012
Category: Uncategorized
15 April 2012,

Are Enhanced Annuities Becoming the Norm?


According to MGM Advantage 70% of the those retiring would potentially qualify for an enhanced annuity which would provide them with a higher income in retirement. However the worrying aspect is that 2% of customers who do not seek advice would go down this route compared to those seeking advice accounting for nearly 41% of the enhanced annuity market.

This situation could become even worse following the implementation of RDR when those individuals with smaller pension pots will find it difficult to get advice in a fee paying world.

The ABI provided the following data for customers receiving advice:

40.6% of premium were for enhanced annuities

41.7% of premium were for conventional annuities

They also state that the the market for enhanced annuities had grown from just over 10% in 2004 to over 40% in 2011. In the non advised market however only 2.2% of sales want down the enhanced route with 83.3% down the conventional.

Andrew Tully, Pensions Technical Director,MGMAdvantage comments: “If anything could demonstrate the value of financial advice, this data does.  Enhanced annuity sales by premium are now equivalent to conventional annuity sales, but only where a customer has received advice.  Given that up to 70% of people could benefit from a higher income because of their health it seems clear that the market isn’t currently helping consumers as much as it should.

“When you look at the differences between enhanced and conventional rates, you can see why as an industry we need to work hard to ensure people shop around for not only the best rate but also the most appropriate product.   Where people receive advice it is clear many benefit substantially, but we need to do more to ensure those who don’t have access to advice also get the best possible outcome in retirement.”


Author: Robert Trapnell- Right Retirement

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