Enhanced annuity sales rise

More and more people are getting better rates on their pension income by taking factors such as health, occupation and even postcode into consideration.

Watson Wyatt, the consultants, says it has seen a “dramatic growth” in people taking out a so-called enhanced annuity, which takes lifestyle factors into account when calculating a person’s pension income.

Those who smoke, are overweight or even live in a less desirable postcode can receive a higher pension income, because of the likelihood that they have a shorter life expectancy.

Sales of enhanced annuities were up nearly a third last year, according to Watson Wyatt. The market now stands at £1.44bn, about a quarter of all annuities sold on the open market in the UK.

Andy Sanders, senior consultant at Watson Wyatt, said the rise in sales was “good news” for consumers, as it gave them more options to maximise their income from pension savings.

The insurance industry has been trying to raise awareness of different options for pension income among consumers, who often do not realise that they can buy their annuity from a different provider than the one they saved with.

Shopping around for the best rate on an annuity can make people thousands of pounds a year better off in retirement.