Smokers could opt for higher pension payouts
Smokers could earn up to 23 per cent more from their pension if they opt for an enhanced annuity, according to Moneyfacts.
An annuity is a contract between a consumer and an insurance company, where a customer buys a contract and in return receives a regular income, usually for life.
An enhanced annuity is when conditions that affect lifespan, including smoking, obesity and diabetes are taken into account when setting payment levels.
If life expectancy is shortened because of a condition, it is reasonable that pension payments during the customer's lifetime should be higher because it is likely their life will be shorter.
Around 40 per cent of the population is entitled to take out an enhanced annuity. They are generally bought with the money built up in a pension pot, when the plan switches from the paying in phase to the paying out, and consumers should be aware of the higher payments they could receive by opting into an enhanced annuity plan.
"The numbers of people who will need to buy an annuity to provide an income for life are forecast to rise steeply over the coming years," said Suzanne Greener, Moneyfacts deputy editor of investment, life and pensions.
"While average amounts to be annuitised remain relatively low, the priority will be to maximise the amount of income received. Enhanced rate annuities can help to achieve this especially when consumers become more aware that lifestyle considerations or a combination of seemingly low level conditions may well make them eligible," she added.
Sales of enhanced rate annuities in 2004 rose by 44 per cent and made up 19 per cent of all annuities sold on the open market. | 
