We can expect the robust growth of annuities in 2024 to continue this year, with another potentially record year for sales possible, according to industry commentators.

While current annuity rates are just below the all-time highs experienced after the Budget, they remain historically high, continuing to drive strong demand.

The latest data from Hargreaves Lansdown’s annuity search engine shows a 65-year-old with a £100,000 pension pot could secure an income of up to £7,490 per year from a single life level annuity with a five-year guarantee.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said the firm has seen a flying start to 2025 for annuities due to rising interest rates and soaring gilt yields.

With the ABI data showing that more people are shopping around for annuity deals, she added that this is also likely to continue to drive a growth in sales.

She said: “There’s increased evidence that people are tailoring their annuity to fit their circumstances with sales of joint life, enhanced and escalating annuities all on the rise. There’s always a concern that people will go with the higher income offered by a single life annuity over a joint life, without realising that this could leave their partner with nothing when they die. The fact that joint life sales have increased is a real positive.

“Similarly, the increase in inflation-linked products shows that our recent experience of high inflation is encouraging retirees to opt for an escalating annuity despite the lower starting incomes (currently £5,412pa for an annuity that escalated 3% per year, single life with a five-year guarantee).”

Pete Cowell, head of annuities at Standard Life, said the provider expects demand for annuities to remain strong, especially due to the recent Budget bringing pensions into scope for inheritance tax from 2027 which is likely to encourage wealthier savers to access more of their pensions, including via annuities.

He added that the growth in the popularity of annuities can be partially attributed to growing interest from financial advisers.

He said: “This surge reflects both the rising demand among retirees and a shift in how financial advisers are considering these types of products when speaking to their clients. There is increasing recognition on the flexible ways a guaranteed income can be integrated into a broader decumulation strategy, creating a tailored retirement plan based on a client’s needs.”

Nick Flynn, retirement income director at Canada Life, said it is seeing increasingly large pension pots being used to purchase annuities

He said: “With people increasingly living longer lives, more individuals are seeking guaranteed income solutions, making annuities an attractive option. Furthermore, with pensions coming into the scope of inheritance tax from 2027, this could be an early sign that people are rethinking their financial plans for their retirement.  

“Our own experience indicates that larger pension pots are also being used to purchase annuities, as customers seek to take advantage of the current high rates available. It’s not uncommon to now see pension funds in excess of £500,000 looking to secure an annuity, dramatically increasing the average purchase price."