Sales of enhanced annuities are set to be at their highest ever if current year to date sales continue for the rest of 2010. According to Towers Watson, UK sales of enhanced annuities totaled £1.26 billion during the first six months of this year. Compared to Q2 2009, this figure represents a rise of over 40%. So at the current rate of sales, this year should see total sales smash the 2009 total of £1.78 billion. Starting in 1995, enhanced annuities offer annuitants the chance of a higher retirement income based on health of lifestyle choices which have lowered their life expectancy. It is thought that these enhanced annuities represent around 33% of all UK annuity sales.
Andy Sanders from Towers Watson says that…”…2010 looks set to be another record year for enhanced annuity sales, with every prospect of breaking the £2.5 billion threshold for the full year. This 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.”
Although enhanced annuity sales have been on the increase, actual annuity rates themselves have been falling in recent times. According to research from Moneyfacts, they have fallen 6% in the last 12 months. With rates being so low, some pensioners may find that the income derived from their pension fund is no longer enough for them to live off in retirement. Some may have to consider alternative sources of income such as part-time work or equity release. Other options include taking a higher risk annuity, such as an investment-linked annuity. Whatever people choose, one thing looks certain and that is that rates are unlikely to recover anytime soon.