UK sales of annuities which offer bigger pensions for retirees with serious medical conditions or unhealthy lifestyles exceeded £4bn for the first time last year, Towers Watson revealed yesterday.
Figures publish by the consultancy indicated that enhanced annuity sales in 2012 totalled £4.48bn - a 49% increase from the £3.01bn recorded in 2011. Ten years earlier, in 2002, enhanced annuity sales amounted to just £651.2m.
Last year included the highest quarterly total sales on record, with £1.32bn of enhanced annuities sold between October and December. Sales in the second half of the year totalled £2.49bn.
Mike Williams, a leader in the insurance management consultancy team at Towers Watson, said the 2012 sales figure was a '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 explained.
Towers Watson expects consumer interest in purchasing an enhanced annuity to continue to grow. 'Despite the latest record level of sales by volume, enhanced annuities are still only around 20% of the total annuity policies sold,' Williams noted. 'The current range of medical conditions and lifestyle factors that can lead to enhancements suggests a greater proportion of retiring consumers could benefit.'
He also highlighted the impact that the review of the annuities market announced by the Financial Services Authority last month could have on underwriting annuities. 'Looking ahead, the impact of the FSA thematic review of annuities looks set to provide further support for the use of individualised underwriting based on health and lifestyle related factors to enable retirees to make the most of whatever pensions savings they have.'
Towers Watson's survey covered nine providers of enhanced annuities: Aviva; Canada Life; Just Retirement; Legal & General; LV=; MGM Advantage; Partnership; Prudential; and Reliance Mutual.
