Let’s start by giving you a little bit of history.
A retiree can cash in their pension and receive an annuity. This annuity grants the retiree a set payment per month in retirement. People who are in poor health upon their retirement are typically eligible for “enhanced annuities,” which grant them roughly one-third more in income. This is because of the fact that people in poor health have a lower life expectancy.
Over the past several years, more than half a million people used their pensions to purchase annuities that did not take their health and lifestyle into account. That means that many people who are eligible for higher payments aren’t receiving those payments.
Could you be eligible for higher payments?
How do you know if you got the right deal on your annuity?
First, ask yourself whether or not you shopped around. Typically, people who shopped around or used a trusted financial advisor often obtained the best deals for their own circumstance. However, at least half of the people who purchased annunities did not do this.
The Financial Conduct Authority, or FCA, discovered that somewhere between four to six people out of 10 — in other words between 40% to 60% of people — did not switch annuity providers (indicating that they might not have shopped around.)
The FCA estimates that about 90% of these people failed to get the best deal relative to their health and lifestyle circumstances.
Many of these people did not receive an enhanced annuity despite the fact that they have high blood pressure, high cholesterol, they’re smokers, they take regular medication or they have other health issues. Generally speaking, people with health issues could qualify for an enhanced annuity that is worth between 25% to 60% extra.
Officials have now warned pension companies that these companies are responsible for people who bought their own annuities. The government has ruled that pension companies should explain to customers how to shop around and should have asked about health and lifestyle. This is required based on their duty of care to customers, according to the FCA.
However, if you believe that you might have been mis-sold a pension, you should not wait for somebody to contact you. You should take the proactive step to contact your insurer, to make sure that you get the payment for which you are qualified.
Ask your pension company to investigate. Provide evidence of your medical record at the time in which you had hired and signed the annuity contract. You will need to show that you were not asked about your health and that you were not informed that your medical conditions might qualify you for a larger income.
In order to qualify for an enhanced annuity retroactively, you must be able to prove that you were in poor health at the time that you bought the annuity. If you were healthy at the time that you bought the annuity, but developed poor health later, you don’t qualify for a retroactive enhanced annuity.
Look to your medical records as well for any documentation or proof that they might be able to supply. If you are a heavy smoker for example, and this is documented on your medical records held by your GP, this might be your way to prove that you should have qualified for an enhanced annuity.