Towers Watson this week reported that sales of enhanced annuities have increase significantly over the last decade. In 2001 the total sales volume for enhanced annuities stood at £419.6m in the UK. Compare this to the sales volume for the first half of this year which now totals £1.42bn, and you can see there has been a dramatic increase. It is thought better awareness of annuity enhancement opportunities coupled with a increase in ‘negative lifestyle factors’ has lead to the sharp increase in sales. Enhanced annuities are available to retirees who have a medical condition or lifestyle choice which acts adversely on their life expectancy. It is estimated there are over 5,000 individual medical conditions which can potentially lead to enhancement. A typical case of eligibility would be someone who smokes heavily or consumes alcohol on a regular basis.
Andy Sanders from the company told FTadvsier.com that…”…this year looks set to be another record year for enhanced annuities with sales projected to reach more than £2.8bn.” Although it is certainly true that there has been a huge drive to increase awareness of enhanced and impaired life annuities, it is still the case than many retirees miss out on a higher retirement income as they were unaware they qualified for these better annuity rates. Because there are so many medical conditions that can lead to enhancement, some have estimated that around two thirds of all new annuitants could in fact qualify for an enhanced annuity despite a much lower number actually buying one.
In 2010 it has been estimated that enhanced annuities represented only around 12% of all annuity sales, despite the commonly held view that well over 50% of annuitants are probably eligible for some kind of enhancement. This means that every year in the UK, thousands of retirees are missing out on a higher retirement income because (you would assume) they were unaware that they were eligible. It would seem that until OMO is made the default option (and there is no current consensus on how this could be implemented), many will continue to miss out on a better annuity.