An enhanced annuity offers more income, still with the benefit of guaranteed income:

• Higher income than a standard annuity if you have qualifying health conditions or lifestyle factors.

• Guaranteed payments for life, so you won’t run out of money.

• No investment risk – your income remains stable regardless of market performance.

• The option to add death benefits to support a loved one after you pass away.

Annuities also give you the option of death benefits, where someone else receives some or all of your pension when you pass away. Typically, choosing to add death benefits to your annuity will reduce the level of regular income you receive while you are alive.

The key factor that sets an enhanced annuity apart is that it considers medical conditions and lifestyle choices. If you have a history of high blood pressure, diabetes, heart disease, or are a smoker, you could qualify for higher income. Even factors like obesity or a history of serious illness may increase your annuity rate.

• Once it’s set up, you typically can’t change your annuity or opt for a different income product.

• Inflation reduces the real value of a level annuity income over time.

• By default, an enhanced annuity won’t have death benefits and when you die the income payments stop. However, as mentioned above, you can add death benefits to your annuity.

• You won’t benefit from investment growth on your pension fund: with an annuity you swap investment ups and downs for guaranteed income.

• Some older pension schemes may come with 'safeguarded benefits' such as a guaranteed annuity rate (GAR) or guaranteed minimum pension (GMP) that could pay more income than you'd get elsewhere. Also, some schemes let you take more than the standard 25% tax-free cash lump sum. Always check whether you have any safeguarded benefits and, if you do, take that into account when comparing what your scheme offers with what's available from annuity providers.