The rise of the enhanced annuity has been given a further boost with the launch this week of a new product from LV.

The insurer is hedging its bets by making the product with profits, exchanging the guarantee of a normal annuity for the opportunity to invest more in equities. John Perks, customer solutions director, said: “We believe in the enhanced market that people are still living a relatively long time, so we think it’s worth having that flexibility.”

Just Retirement said this week that it expected enhanced annuities to increase their share of the overall market from the 11 per cent they had in the last quarter of 2007, as the industry works towards raising awareness of the different kinds of annuities.

In January, Watson Wyatt said as many as 40 per cent of people who buy an annuity could qualify for an enhanced annuity.

Sales of enhanced annuities are likely be so great that they will push down standard annuity prices, as only the healthy and long lived will be left on standard annuity books.

Nigel Callaghan, pensions analyst at Hargreaves Lansdown, said: “Up to now the enhanced market has been with insurers the general public don’t really know. But now, large UK insurers are starting to realise there’s a lot of money to be made here and are circling in.”

Standard annuity rates are currently very favourable as a result of the credit crunch, he said. They recently hit at a five-year high due to soaring yields on corporate bonds, where annuities are predominantly invested.