Demand for annuities is likely to bounce back and could “double in size” over the next decade, according to Hargreaves Lansdown.

Research by the firm shows that 12 per cent of retirees currently in the market buy annuities, however 43 per cent of people approaching retirement are thinking about buying one, as baby boomers’ appetite for risk decreases.

The 2015 Pension Freedom Act has meant annuity providers have halved, as retirees “dash for cash” and opt for more control over their pension pots.

Hargreaves Lansdown senior pension analyst, Nathan Long, said: “The relatively abrupt introduction of pension freedom, coupled with low interest rates and the surge of baby boomers hitting retirement resulted in a short-term dash for cash. As these investors move later into retirement their appetite for the security of a guaranteed annuity income is likely to increase.”

The research also found that over half of investors thinking about buying an annuity would expect an income rate of 6.5 per cent, while 40 per cent would only by an annuity if the rate was 8 per cent or more.

“We anticipate demand for annuities will pick up again, in fact, it is more a matter of when rather than if. Our best estimate is we could see significant growth in the market around eight to 10 years from now as investors’ demand increases in response to their changing circumstances”, Long added.

Despite this, Long believes the effects of a shrinking annuities market could be at the detriment to retirees, who will have limited options for secure income in the future and urges them to purchase an annuity in combination income drawdown for flexible access to cash.

He said: “The government and the regulator both have a significant role to play in ensuring that secure income continues to be available to pension savers in the longer term. With new rules coming in next year, 2018 looks set to be a pivotal time for the future of the annuity market.”

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