Advancements in medical science are continuing to have an impact on the annuity market, with providers finding new ways to predict a retiree’s life expectancy.
A recent report in a specialist medical journal revealed how a simple eye test could help diagnose Alzheimer’s disease much earlier than is currently possible.
Several providers of impaired life annuities confirmed the test would be considered for inclusion in annuity underwriting if it became widely available.
Alzheimer’s is known to reduce life expectancy, but can also lead to increased care costs. But some providers warned that, as dementia often does not impact life expectancy as much as other conditions, some enhancements to the rate would be small.
Jules Charrington, technical and medical underwriter at MGM Advantage, said: “In terms of annuity underwriting, this development could mean younger clients will qualify for an enhanced rate, as they will have been given a diagnosis of Alzheimer’s and potentially other dementias, a number of years prior to retirement.
“Currently, we often do not see the diagnosis at annuity application stage, even though the condition may be lurking.”
She added: “In the far distant future, when this development leads to better treatments and disease reversal, we may see dementias coming off the list of qualifying conditions.
“But for now, it is likely to mean more clients are aware of the disease, have a definitive diagnosis early enough to qualify them, and so receive an uplift to their retirement income.”
Billy Burrows, director of retirement advisory firm Burrows Cummins, warned that recent moves in treatment for debilitating diseases such as Alzheimer’s and Parkinson’s may not be all good news for those approaching retirement.
He said: “The overarching message is that medical science is finding more and more ways of keeping people alive longer, which reflects on annuities.
“The other point is people are living longer, but they are also living longer with a disability or in care. This means annuities will have to stretch further, but rates will continue to come down.”
Burrows added that the combined effects of improving longevity, the spread of postcode weighting across annuity providers and the possible impact of the EU’s Solvency II legislation are all taking their toll on annuity rates.
PM research from this month’s asset-backed annuities survey (see pages 28-35) suggests with-profits rates have fallen by around two percentage points since the summer of 2008.
