A means is provided for improving the magnetic permeability of a magnetic circuit within a variable reluctance sensor having off-set, permanent magnets by appropriately annealing the magnetic flux member. The annealing process includes heating the machined magnetic flux member in a vacuum to a temperature and for a duration sufficient to austenitize the magnetic steel so that full carbide solution is obtained, for example about 1300.degree. F. to about 1550.degree. F. for a duration of about 15 to 30 minutes. The magnetic flux member is then appropriately cooled in the vacuum so as to prevent the formation of martensite. The magnetic circuit, incorporating the annealed magnetic flux member, exhibited improved magnetic permeability, and the sensor signal was increased by as much as about 60 percent during operation. The method of this invention enhances the overall effectiveness of the sensor, particularly when sensing low rotational speeds such as when employed within automotive anti-lock braking or traction control systems.