Bar chart showing enhanced annuities in the UK annuity marketWith conventional
annuity rates being driven down by low interest rates, UK consumers
are increasingly recognising the income benefits to be derived from
enhanced annuities.

To qualify for an enhanced
annuity, a buyer has to have a serious medical condition or a
negative lifestyle which can include factors such as obesity,
smoking and occupation.

Indicating the growing
interest in enhanced annuities, professional services firm Towers
Watson reports that sales in the second quarter of 2011 came in at
£774.5m ($1.28bn), the highest quarterly sales figure since
enhanced annuities were introduced in the UK in 1995.

Sales in the first half of
2011 were £1.43bn, an increase of 14% compared with the first half
of 2010, according to Towers Watson.

Andy Sanders, a senior
consultant in Towers Watson’s insurance management consultancy,
said: “2011 looks set to be another record year for enhanced
annuities, with sales projected to reach over £2.8bn. Many
thousands of 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. But there is
scope for enhanced annuities to reach a yet wider cross-section of
those preparing for their retirement.”

Sanders noted that of consumers in the UK who bought
annuities in 2010, 12% bought enhanced annuities.