Quarterly enhanced annuity sales broke the billion pound barrier for the first time in the second quarter of 2012, according to research by Towers Watson. First half sales were £1.99 billion in total, an increase of 39% over the corresponding period in 2011.
Andy Sanders, a senior consultant in the Insurance Management Consultancy team at Towers Watson, said: "Exceeding £1 billion of sales in a quarter is yet another landmark in the enhanced annuity market. In this period, over 20,000 consumers benefited from higher pension incomes because their medical condition or lifestyle has been assessed and a lower than average expectation of life anticipated. “
Consumer interest in taking out enhanced annuities, which provide bigger pensions for those with serious medical conditions or with negative lifestyle factors such as those linked to weight, smoking and occupation, is set to continue given the potential to reach an even wider cross-section of the population.
Andy Sanders noted: “Despite the latest record level of sales by volume, enhanced annuities are still only around 20% 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.”
He added: “And looking further ahead into 2013 and beyond when gender neutral pricing of insurance products is in place, the use of individualised underwriting based on health and lifestyle related factors may gain further traction as retirees strive to make the most of whatever pensions savings they do have.”
Trends in enhanced annuity sales
Year Sales (millions)
2001 £419.6
2002 £651.2
2003 £698.6
2004 £593.4
2005 £638.7
2006 £815.9
2007 £1,095.1
2008 £1,444.6
2009 £1,785.6
2010 £2,468.1
2011 £3,019.4
1st half 2012 £1,992.4
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