Annuity rates have risen by 35% over the past year to hit their highest point in a decade, according to a new report.

A 65-year-old retirement saver with a £100,000 pension can now get an annuity income of £6,637 per year (single life level annuity with five-year guarantee).

Last September the same retirement saver would have only achieved an income of around £4,900 per year, according to data from Hargreaves Lansdown.

The last time annuity rates were this high was March 2010, when a 65-year-old male could get around £6,678.

Annuity rates have been in decline since the start of the global financial crisis in 2008, and in the UK hit an all-time low in the aftermath of the Brexit vote in 2016.

Rates are expected to rise further still following the decision today by the Bank of England's Money Policy Committee to increase the base rate to 2.25%.

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: “Annuities once ruled the roost in retirement income but the low rates on offer meant they faced criticism that they offered poor value for money. The introduction of Freedom and Choice, which gave people much more flexibility over how they took their pension, saw their use decline hugely.

“These rising rates could encourage people who wouldn’t have thought of purchasing an annuity this time last year to give them serious consideration.”

A separate report from Standard Life earlier this week said that annuity rates had improved by 25% since the start of this calendar year.

Canada Life has also highlighted improved annuity rates. The retirement provider’s benchmark reference annuity of £100,000 at age 65 will now pay around £6,353 income a year, compared to £4,542 for the same annuity purchased at the start of 2022.

Nick Flynn, retirement income director at Canada Life, said the rise was the 16^th time this year annuity rates have improved this year.

He said: “Annuity rates have continued to bounce back following changes to base rate and the improvements in yields on gilts, with rates up around 40% this year. This sustained growth in potential income warrants giving annuities a second look, especially for anyone concerned about income security in retirement.

“Annuities can play a key role in retirement plans and it will always play to shop around for not only the best rate but the right shape annuity.”