Sales of enhanced annuities fell by 29% in the first quarter of 2016, according to research carried out by Willis Towers Watson.
Quarterly premiums fell to £254.2 million in Q1 2016, compared to £357.4 million in Q4 2015.
An enhanced annuity (also known as an ‘ill health annuity’) pays a higher rate of income then a standard annuity, but is dependent on an individual’s health and lifestyle. Some of the qualifying conditions for purchasing an enhanced annuity include being a smoker, overweight, relying on prescribed medication or having a risk of heart disease.
The sales of unit backed guarantees (or ‘variable annuities’) increased in Q1 2016 after dropping in Q4 2015. The total value of premiums sold increased by 17%, while the average premium per policy fell by 2% to £97,240.
Jeremy Nurse, a director at Willis Towers Watson, said:
“The new pension flexibilities introduced in April 2015 had a major impact on the market for enhanced annuities, but these pension freedoms are now settling in and working as intended.
“However, in contrast to the steep declines recorded in 2014, the last 3 sets of quarterly results provide a broader picture that suggests the rate of decline may now be slowing and some stability returning to the annuities market.”