Last year was a “milestone year” for annuities, as total sales increased by 46 per cent to £5.2bn, data from the Association for British Insurers (ABI) has revealed.

This marks the highest annual value since pension freedoms were announced in 2014, granting retirees more flexibility over how to access their retirement savings.

The record year included a "bumper" fourth quarter that saw £1.5bn in sales, off the back of a strong third quarter when sales totalled £1.4bn.

The number of annuity contracts sold also increased in 2023, increasing 34 per cent to 72,200, the largest number recorded since 2016.

Level-only annuities, which pay the same income every year but can be vulnerable to inflation, remained the most popular version of the product, at 82 per cent of the total number sold.

The proportion of escalating annuities sold also increased by 2 percentage points compared to 2022, making up the remaining 18 per cent of total sales.

Standard Life head of annuities, Pete Cowell, highlighted the figures as demonstration of a "resurgence" of annuities, arguing that "increasingly the question is actually how much to annuitise and when, rather than whether to annuitise or not".

The ABI's data also found evidence that savers are engaging more when reviewing their annuity options, as 64 per cent of annuity buyers shopped around in 2023, taking an annuity from a different provider to the one they held their pension savings with.

Just Group group communications director, Stephen Lowe, identified this finding as the "stand out" trend, representing a "transformation" in consumer behaviour, driven in part by a positive intervention by the Financial Conduct Authority to improve competition.

"Well-designed regulation can make a difference," he added. “Advisers led the revolution many years ago by using technology to shop around the market to ensure their clients secured the best guaranteed income for life...The rest of the market is beginning to catch-up.”

However, less than a third (29 per cent) of customers who bought an annuity did so with the help of professional advice.

ABI head of long-term savings policy, Rob Yuille, stated: “Securing a guaranteed income for life remains an important part of the mix of options for people to consider at and during retirement, and it’s great to see more people taking advantage of the protection they have to offer. It is also encouraging to see more people exploring the market to secure a higher income.

“However, we’d like to see more people taking advantage of professional advice and new forms of targeted support for consumers to ensure they can enjoy the best possible retirement.”

In addition to strong annuity sales, the ABI's data showed that the bulk annuity market also continued to thrive, with sales reaching £22bn in the final quarter of 2023, taking the yearly total to £49.3bn.

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