Record sales for enhanced annuities in 2009

UK – March 8, 2010 - Sales of enhanced annuities in the UK rose to £1.79 billion last year, an increase of 24 per cent on 2008, according to research by consultants Towers Watson. Sales in the fourth quarter of 2009 reached record levels of £478.8 million, significantly up from third quarter sales of £415.8 million. According to the firm, the market share of enhanced annuity sales, as a percentage of total pensions annuity sales, has more than doubled since 2001 when the research started.

Andy Sanders, senior consultant at Towers Watson, said: “2009 was another record year for enhanced annuity sales and means more consumers are benefiting from higher pension incomes because their medical condition or lifestyle has been assessed and a lower than average expectation of life anticipated. However, a successful enhanced annuity market does have implications. For those lives that do not qualify for an enhancement, average expectations of life will continue to lengthen which needs to be reflected in lower levels of pension income offered. Furthermore, product providers, whether active in the enhanced annuity market or not, need to carefully assess the mortality assumptions in their product pricing to ensure these suitably reflect the expectations of life of the consumers seeking their products.”

According to Towers Watson, consumer interest in taking out enhanced annuities – which provide bigger pensions for those with serious medical conditions or with negative lifestyle factors such as weight, smoking and occupation – is set to continue. Enhanced annuities, also known as impaired life annuities, make up around a third of all annuities sold (by premium volume) in the open market in the UK.

Enhanced annuity sales

* enhanced annuity sales as a percentage of total pensions annuity sales.

Notes to editors

Enhanced or impaired life annuities were first introduced in the UK in 1995 and have rapidly gained a substantial market share of all annuities sold. They include: annuities enhanced for serious medical conditions; annuities for smokers; and annuities enhanced as a result of lifestyle factors such as weight or occupation. The survey covered eleven providers of enhanced annuities: Aviva, Axa, Canada Life, Just Retirement, Legal & General, LV=, MGM Advantage, Partnership, Prudential, Reliance Mutual and Scottish Widows.