If you suffer from certain medical conditions, or if you smoke, an impaired-life or enhanced annuity could significantly increase your income in retirement.

Choosing to draw an income from your pension by purchasing an annuity offers a secure taxable income paid to you for the rest of your life by an insurance company and, in return for your pension savings, you could also qualify for some enhancement on your income.

An impaired-life annuity pays out more to people with particular health problems (anything from a triple heart bypass to high blood pressure) and is based on the individual’s circumstances. Most providers look at your personal situation in detail. For example, two people who have both had a heart attack could still receive different levels of enhancement, depending on the type of attack and when it occurred.

An enhanced annuity is less tailored than an impaired-life annuity and pays a higher annuity rate to those with particular lifestyles, including smokers and the obese. Even if you’re not eligible for an enhanced annuity, or you’re unsure whether you’re eligible, you should receive professional advice to see if you can obtain a better deal than the one you’re being offered by your pension scheme or provider.

You shouldn’t automatically accept the income offered to you by your pension company without first considering what other options are available elsewhere. Different rates of income are offered by different insurance companies, so it’s important to shop around to secure the highest income possible.

It may seem an easy option to purchase your annuity from the same provider with whom you built up your pension. However, by taking advantage of the Open Market Option (OMO) you could significantly increase the level of income you receive and therefore your lifestyle in retirement.

With life expectancy levels on the increase and the possibility of new European legislation driving annuity rates downwards, you need to ensure that you obtain the highest possible level of income from your pension.

By shopping around and taking your health into consideration, it’s possible to increase your income and give yourself a better standard of living in retirement.