Enhanced annuity sales rose to £4.48bn in 2012, an increase of 49 per cent compared to 2011, research by Towers Watson found. This compares to £3.01bn in 2011 and £2.46bn in 2010.

Second half sales in 2012 stood at £2.49bn and the final quarter of the year represented a quarterly record with sales reaching £1.32bn.

Sales of enhanced annuities, which provide bigger pensions for those with serious medical conditions or with negative lifestyle choices such as smoking, are set to continue “given the potential to reach an even wider cross-section of the population”, the consultancy said.

The firm’s leader in the insurance management consultancy team Mike Williams said: “2012 sales approaching £4.5bn is yet another landmark in the enhanced annuity market. Over 85,000 consumers benefited from higher pension incomes because their medical condition or lifestyle has been assessed and a lower than average expectation of life anticipated.”

He added: “Despite the latest record level of sales by volume, enhanced annuities are still only around 20 per cent of the total annuity policies sold. The current range of medical conditions and lifestyle factors that can lead to enhancements suggests a greater proportion of retiring consumers could benefit."

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