Sales of variable annuities have doubled in the past year to over £1bn, according to research from Watson Wyatt.
Variable annuity premiums grew from £539m in 2007 to £1.15bn last year while the number of policies sold rose by more than 80 per cent from 7,775 to 14,128.
Watson Wyatt says the rise was a result of financial advisers and consumers becoming more familiar with third-way products, offered in the UK by Aegon Scottish Equitable, The Hartford, Lincoln Financial Group and MetLife.
It also suggests the benefits of underlying investment guarantees became more apparent during recent turbulent market conditions.
Forty per cent of premiums for variable annuities are from people aged under 60 years, which Watson Wyatt says may dispel perceptions that the products are only for those at or in retirement.
Over a third of the total premiums relate to investments of less than £75,000, which the firm says suggests the product may be appealing to a wider cross-section of people than first envisaged.
Senior consultant Andy Sanders says: “What is encouraging for this fledgling market is that variable annuity sales appear to have held up well so far in the early stages of the current financial crisis, with sales during 2008 increasing quarter upon quarter.
“It will be interesting to see how well these products do during 2009 as the economic downturn plays out. It may be that new designs will be required to maintain and develop further interest among UK consumers.”