Total sales of enhanced annuities rose significantly last year as more UK adults with health issues looked to benefit from improved pension deals.

Consultancy firm Towers Watson has published new figures which show that sales of the products reached £3.02 billion in 2011, an increase of 22 per cent compared to the previous year.

Enhanced annuities have become increasingly popular over the past decade, with the report showing that sales of the policies equated to just £419.6 million in 2001.

First launched in 1995, enhanced annuities offer higher returns on their pensions to those with medical conditions and lifestyle factors that reduce life expectancy such as weight, smoking and occupation.

Consumers suffering from very serious conditions can potentially boost their retirement income by around 50 per cent, although the typical uplift is somewhere between 20 and 25 per cent.

Only 15 per cent of total annuities sold to consumers in 2011 were enhanced products but Towers Watson forecast that even more people could benefit from them.

Andy Sanders, a senior consultant in the insurance management consultancy team at Towers Watson, claimed that some people may be missing out on enhanced annuities that they are entitled to.

"Enhanced annuity sales were around 15 per cent of the total annuities sold to consumers in 2011, yet the current range of medical conditions and lifestyle factors that can lead to enhancements suggests a greater proportion of retirees could benefit," he said. 

"Greater use of the open market option at the point of annuitisation would undoubtedly drive this percentage higher."

The Association of British Insurers (ABI) is set to release a new mandatory code of conduct for pension providers, which will require them to ask their customers a series of questions to determine the best type of annuity for them and whether they are entitled to an enhanced annuity.