Poor health could secure you a higher retirement income
Globally, men have a lower life expectancy than women. In South Africa, the average 65-year-old male will live to 82, seven years fewer than a 65-year-old female.
Locally, figures show that the leading causes of mortality are tuberculosis, HIV and cerebrovascular diseases such as strokes, but there are other debilitating male-specific illnesses that are increasing in numbers and deserve attention. Approximately 1.4 million men worldwide are diagnosed annually with prostate cancer and it is estimated that in South Africa specifically, prostate cancer will surpass all other forms of cancer by 2023, with an 140% increase in cases by 2030. Prostate cancer is one of the leading cancers affecting South African men, with a 1-in-16 lifetime risk.
“As you get older, it may not always be possible to prevent an illness from developing,” says Just SA Pricing Actuary Ryan Hultzer, “but poor health should not stand in the way of securing a retirement income that lasts as long as you do and allows you to retire comfortably.”
One way in which those approaching retirement – including survivors of cancer (and other life-threatening illnesses) – can enjoy a guaranteed retirement income for life is by purchasing a life annuity, he says.
“Multiple factors affect the starting income of a life annuity, including one’s life expectancy,” says Hultzer. “But fundamentally, by declaring your full medical history to our underwriters when you request a quote on a life annuity, it may be possible to qualify for an enhanced annuity. An enhanced annuity offers a higher starting income based on the assumption that you may have a shorter-than-average life expectancy.”
Just SA’s latest inhouse data reveals that underwritten cases have enabled 62% of retirees buying a pension to get an uplift in their monthly retirement income, simply by answering a few questions about their lifestyle and health. Of these, over a third qualified for an uplift greater than 5%.
Hultzer adds that the nature of traditional life insurance cover may cause some people to be hesitant about being medically underwritten at retirement as they incorrectly assume they could be penalised for declaring any existing conditions, whereas in fact it is quite the opposite.
“Unlike life cover that pays a lump sum on death, where those with a higher risk of early death are required to pay higher premiums, it is only fair that these same people should benefit from a higher income in retirement because of their shortened life expectancy, be that due to poor health, socio-economic factors or lifestyle factors.”
How much more could a retiree diagnosed with prostate cancer qualify for?
In a case study from Just SA, a 79-year-old man qualified for an uplift of 21% above standard rates as a result of his medical history. He was a non-smoker who, upon initial diagnosis of his prostate cancer, was told that it had not spread. Three years later, cancerous glands were found under his armpit, resulting in surgery and radiation. He was later diagnosed with emphysema affecting the top part of his lung, a side effect of the cancer treatment.
“Not all cancers are the same,” says Hultzer, “and while some might not spread, others might have already spread by the time they are diagnosed. The stage of the cancer as well as the cancer’s unique behaviour can determine your life expectancy, which in turn can determine your possible uplift in retirement income.
“Ultimately, underwriting at retirement is a fair way of ensuring you get the right income for life. It also gives you confidence that you are getting the highest possible starting income for your retirement savings,” he concludes.
4. National Cancer Registry (NCR) 2017