Ignorance of how health can positively influence annuity rates costs retired people £1.25bn in pension benefits a year, according to research by Partnership.
The provider’s survey of 3,000 consumers shows half of people over 50 with poor health do not know their illness could entitle them to a greater annuity in retirement.
Partnership says failing to act on the entitlement could potentially cost people more than £20,000 during retirement.
The research found around 90% of pensioners with poor health bought a greater monthly annuity by switching provider.
However, a total of 75% of people nearing retirement do not know what the open market option (OMO) is and almost 60% of retired people fail to take advantage of it.
More than half of diabetes and other non-life threatening illnesses sufferers do not know what OMO is and 16% do not think they would benefit from switching provider.
Almost 20% of chronic illness sufferers do not believe they would benefit from shopping around for an impaired annuity product, the survey says.
Ian Owen, chairman of Partnership, says: “With more than 40% of people suffering from poor health, there is a huge potential market for health based annuity products for the adviser and a real opportunity for the adviser community to demonstrate real added value; the open market option doesn’t cost anything and can often deliver a considerably higher annuity rate – a win-win situation for both adviser and retiree.”
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