Variable annuity sales increased by 34 per cent in the first half of 2010 to £445million, finds Towers Watson, with the value of sales changing little between the first two quarters of 2010, accounting for £222million and £223million respectively.

These third way products could suit a ‘sizeable’ segment of consumers that are both approaching and at retirement, presenting a significant commercial opportunity for providers, said the financial consultant.

“It is encouraging that there has been a bounce in sales compared to the second half of 2009,” commented Andy Sanders, senior consultant at Towers Watson. “However, those sales were much reduced relative to the first half of 2009, prompted by product redesigns and the exit of the Hartford from the market place as a result of the impact of the financial crisis. With first and second quarter sales in 2010 so similar (and below comparable levels of 2009), consumers and advisers may need reminding of the virtues of ‘third way’ propositions like variable annuities as alternatives to conventional annuities and income drawdown.”

Sanders added that it currently looks challenging for sales this year to reach the billion pound heights of 2008 and 2009, but that it will be interesting to see the impact that innovation and new product launches could have on sales in the remainder of 2010.

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