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Enhanced annuities boost income by a quarter

Enhanced annuities payout 22 per cent more income on average than conventional annuities, according to MGM Advantage.

The firm’s new annuity index, which tracks the income paid on both products on a quarterly basis, reveals that a 65 year old man with a £50,000 pension pot would receive around £3,575 extra for the first five years of retirement, or £715 each year, with an enhanced annuity. If he lived to the average life expectancy he would be £8,580 better off.

A 65 year old woman would be £3,405 better off for the first five years or £682 each year if she bought an enhanced annuity and £11,579 better off over her lifetime, if she reached the average life expectancy, according to MGM.

Last year, more than 60 per cent of people buying an annuity remained with their pension provider.

Director Craig Fazzini-Jones says: “Many people close to retirement do not realise that they can shop around for the best annuity rate and increase their retirement income by thousands of pounds. But shopping around is easy to do, especially with the help of a financial adviser.

“The other problem is that many people approaching retirement feel fit and healthy and would not consider that they could qualify for an enhanced annuity. But there are well over 1,000 medical conditions that could entitle you to a higher guaranteed income in retirement.”

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