UK - Sales of enhanced annuities rose by 35% last year to pass £1bn (€1.34bn) for the first time.
According to results for January to September 2007, enhanced annuities accounted for 22.5% of the entire open market for annuities.
Mark Joannes, senior consultant, Watson Wyatt, said: "There are currently eight enhanced annuity providers in the UK with at least three more entrants expected in 2008. The impact on standard annuities may force more standard annuity providers to enter the enhanced annuity market as a defensive measure."
Enhanced annuities, also referred to as impaired life annuities in some quarters, provide larger pensions for those with serious medical conditions or negative lifestyle factors such as weight, smoking or occupational risks.
Watson Wyatt said approximately 40% of people taking out an annuity might be entitled to an enhanced annuity. The firm said 'standard' annuity providers, whose clients lead healthier lives, faced downward pressure on their annuity rates and margins.