Researchers from Moneyfacts say last year saw the highest increases in annuity rates since the company began researching the market in 1994.
Investment Life and Pensions Moneyfacts reported that 2013 experienced the first annual increase in pension annuity rates since 2007.
The record year of growth was due to rising gilt yields and a return to a more competitive pricing environment.
Having fallen to an all-time low in March 2013 annuity rates rallied strongly for the remainder of the year and overall annuity rates are at their highest levels since June 2012.
As a result, the average annual income payable from a standard level without guarantee annuity for a 65 year old rose by 9.1% based on a £10,000 purchase price and by 10.5% based on a £50,000 purchase price during 2013.
This represents the biggest annual increase in annuity rates since Moneyfacts first began researching the annuity market back in 1994. By comparison, the previous biggest annual increase in annuity rates was in 2007, when income rose by 4.4%.
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Richard Eagling, head of pensions at Moneyfacts, said: "When it comes to the annuity market it has become customary in recent times to report another disappointing year of falling annuity rates.
"However, 2013 proved to be an excellent year for annuity income with rates halting their historical decline and actually increasing. Given the extreme difficulties of securing a comfortable retirement income this increase in annuity rates is welcome news for retirees."
The company said there were encouraging signs that competition was intensifying at the top end of the standard annuity market, but said some providers were still lagging behind.
It found that enhanced annuities saw a bigger rate increases than standard annuities but warned retirees not to become complacent as a big gap still exists between the best and worst open market option annuity rates.
Even though 2013 saw a strong increase in annuity income, the survey highlighted that on a historical basis annuity rates remain subdued. Annuity income remains 36% lower than 15 years ago and 21% lower than five years ago.