Securing higher income in retirement

Bjorn Ladewig informs us how an enhanced life annuity offers retirees with diabetes the opportunity to ensure they are getting the highest possible starting income in retirement.

Diabetes affects over 4,5 million[1] known adults in South Africa, while many more may be living with the disease and are unaware. A key comorbidity of COVID-19, it unfortunately gives those retiring with the disease greater reason for concern over the years ahead.

An enhanced life annuity offers retirees with diabetes (or any life-threatening illness or poor health) the opportunity to ensure they are getting the highest possible starting income in retirement.

Latest stats

Based on latest figures, and other statistics relating to the health of the South African population, enhanced life annuities benefit at least 40% of retirees. 

Our Retirement Insights research shows while 74% of South Africans in or approaching retirement have re-evaluated their retirement risks due to COVID-19, only two in five are confident that their retirement savings will last.

Retirees are in fact able to mitigate the risk of depleting their savings by purchasing a guaranteed income for life in the form of a life annuity. This can be done at or during retirement, as they can switch from a living annuity to an enhanced life annuity at any time. And those retiring with diabetes or other health-related conditions, could qualify for a higher starting income.

How a life annuity works?

The starting income of a life annuity depends on many factors, one being the life expectancy of the retiree. All life annuities use average life expectancy to determine the initial starting income.

However, if you have an impaired life, it’s possible for an enhanced annuity to offer a higher starting income based on the assumption that you may have a shorter-than-average life expectancy. An enhanced annuity can offer up to 30% higher guaranteed income for life.  There is no downside to the life expectancy assessment. The initial personal assessment is free and there is no obligation.

Underwriting may not always lead to an uplift in income. It may be the case that a medical condition results in a lower quality of life, but not a lower life expectancy, or that a quote is prepared for not one client but a couple, where one life is medically impaired and the other is healthy and/or young, which could dilute the impact.”

Underwriting at retirement is a fair way of ensuring you get the right income, for life, and gives you confidence that you are getting the highest possible starting income for your retirement savings.

Four steps to receive an underwritten quote for retirees

  1. A 20-minute phone call by a professional underwriter.
  2. Answer a few questions about socio-economic, health and lifestyle factors – no new medical tests or paperwork required.
  3. Your personal situation is assessed by the insurer to see if you qualify for a higher income. If it is for a couple, this will incorporate your spouse’s assessment.
  4. A fair quotation based on the answers is presented, which confirms the starting income.

This article was written by Bjorn Ladewig, Longevity Actuary at Just SA.

Header image by FreePik