The UK recorded an increase of 31.9 per cent in the sales of enhanced annuities in 2008, taking the total to £1.44bn, say consultants at Watson Wyatt.

Over the last eight years, annual sales have increased by 240 per cent, and the financial consultant expects this trend to continue.

The product, which provides bigger pensions for those with serious medical conditions or negative lifestyle factors, and are also known as impaired life annuities, now account for a quarter of all annuities sold in the open market in the UK.

Enhanced annuity sales increase threefoldAndy Sanders, a senior consultant at Watson Wyatt, said: "Conventional annuities, still the lion's share of the current market,
are increasingly being segmented by the application of full or partial underwriting, whether based on health or on postcode as a proxy for expectations of longevity.

"These, and other means of segmentation, are good news for consumers as they provide more options with which to maximise their income from pensions savings. It does, however mean a more complex environment within which product providers have to operate in order to be competitively prices," he added.

According to Watson Wyatt's research, the average enhanced annuity premium in 2008 was just over £52,000.

- Pensions Age February 2009

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