A quarter (25%) of over-50s incorrectly think the best rates of annuity are given to those with underlying health conditions, Standard Life has found.

When asked to answer whether it is true or false whether annuities give the best rates to those with underlying health conditions, only 18% of over-50s acknowledged that it is false, with the majority (57%) saying they did not know.

Standard Life said this means that many over-50s may miss the best deals in retirement due to confusion and lack of understanding around enhanced annuities, which can provide better rates.

Having a health condition can make some insurance products, such as life insurance, more expensive. However, enhanced annuities provide a more generous income depending on lifestyle factors, as well as the severity of their health condition.

Head of annuities at Standard Life, Pete Cowell, said: "It is often assumed that having a health condition makes insurance products more expensive. However what many people don’t realise is that enhanced annuities can often provide a more generous income to those suffering from health conditions or shorter life expectancy. With annuity rates having risen significantly over the last year, the value and security they offer makes them hard to overlook, especially for those with health conditions."

Almost all (95%) of over-50s said their current health is at least somewhat important to them when deciding what to do with their pension pot. A further quarter (26%) stated that they annuitised or will annuitise some of their pension savings because a pre-existing medical condition will make decision-making harder for them in later life.

Standard Life said that improved education and advice on how enhanced annuities can benefit those with health conditions is therefore vital, especially given over a fifth (21%) of over-50s with a defined contribution pension or SIPP would also consider taking out an annuity if they fell into ill health.

Cowell added: "Health and life expectancy are key factors that inform decision-making around savings and people’s retirement plans. This research clearly demonstrates that people should be made more aware of the benefits and additional income they may be entitled to.

"Greater emphasis on high quality advice and guidance is therefore more important than ever to ensure people of retirement age understand the range of annuities available to them. Options such as enhanced annuities can often provide good customer outcomes that better suit people’s health concerns and needs in retirement."

---