Annuity rates increased by 35 per cent over the past year, reaching their highest level in more than a decade, analysis from Hargreaves Lansdown has revealed.

The research showed that someone aged 65 with a £100,000 pension can now get an annuity income of £6,637 per year, up from £4,900 per year last September.

According to Hargreaves Lansdown, the last time annuity rates were as high was March 2010, when a 65-year-old male could get an annuity income of £6,678.

Industry experts have previously suggested that annuities could be making a "fight back" amid changes in interest rates, with suggestions that new pension models, such as a 'flex first, fix later' pension, could help ensure savers benefit from both flexibility and the guaranteed income of an annuity.

However, there are still challenges surrounding annuities, with industry research suggesting that although there has been a rise in the number of people purchasing annuities in later life, many are still reluctant to buy annuities because they do not understand them.

Hargreaves Lansdown senior pensions and retirement analyst, Helen Morrissey, commented: “Annuity rates continue to soar – increasing by 35 per cent this year alone – reaching a level not seen for more than a decade.

“If we see a further interest rate rise today, then we could see these rates rise still further in the coming weeks.

“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."

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