Annuity rates have increased by almost 50 per cent over the past two years, according to data from Hargreaves Lansdown.

The research showed that, in 2021, a 65-year-old with a £100,000 pension could have bought an annuity worth £4,949. Today, the same sum would buy an income of £7,358 a year.

While pension freedoms introduced in the mid-2000s meant large numbers of people decided against annuity purchase, recent demand for information on annuities has soared, said Hargreaves Lansdown.

The firm said it had seen a 120 per cent increase in searches for annuity quotes between July and August 2022 and the same period in 2023.

What’s more, with interest rates expected to rise further, annuity rates could continue to surge.

The Bank of England increased interest rates by a quarter of a percentage point to a 15-year-high of 5.25 per cent on 3 August; two of the MPC’s members voted to increase by 0.5 per cent.

Many commentators anticipate that interest rates have further to go, and will remain high for the next two years.

“Interest rate increases could bring further income boosts over the coming months and will certainly stoke further interest in a market that has looked decidedly lacklustre in recent years,” said Hargreaves Lansdown’s head of retirement analysis, Helen Morrissey.

“Interest [in annuities] has already skyrocketed with the number of quotes generated on HL’s annuity search engine soaring over the past year. They peaked in the aftermath of last year’s mini-Budget before falling back. However, they’ve been on a steady upward trend again in recent months.”

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