An unhealthy interest

The rise of impaired annuity providers at the start of the decade prompted a migration of the least healthy annuitants away from traditional providers, skewing their mortality assumptions and capital reserves. But as mainstream annuity providers use an increasingly granular level of information in their underwriting, the boundaries have become blurred.

Before 2000 an annuity was an annuity. If Mr Smith and Mr Jones were both aged 65 with the same level of savings, they could both buy one off-the-shelf annuity at the same rate. Because of increased female life expectancy, Mrs Smith would have received a slightly lower rate than her husband, but this was the only material difference in annuity pricing.

This approach, of course, ignores the significant differences lifestyle can have on how long an annuitant will live. According to UK medical