Enhanced life annuity sales rise to a record

Sales of so-called enhanced life annuities soared by nearly a quarter to reach a new record high during 2009.

The market share of enhanced life annuities, also known as impaired life annuities, has more than doubled since 2001 to account for nearly 17 per cent of all annuity sales last year.

Sales of the product totalled 1.79bn during the year, up from 1.44bn during 2008, according to consultants Towers Watson.

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Annuities enable people to convert their pension pot into a regular pension income for the rest of their life.

Enhanced life annuities pay higher rates than conventional annuities to people with certain medical conditions or negative lifestyle factors, such as being overweight or smoking, to reflect their lower life expectancy.

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."

But the group warned that the growing popularity of enhanced life annuities would have an impact on annuity rates for people who did not qualify for them.

Mr Sanders said that for those who 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".