Annuities have hit their highest level since December, according to new data.

A 65-year-old with a £100,000 pension could currently buy an income of up to £7,017 per year, according to Hargreaves Lansdown’s annuity comparison tools.

Rising interest rates have led to a surge in annuity rates over the past 18 months.

With more interest rate rises from the Bank of England possible, further increases to annuity rates over the next few months may be on the cards.

Annuity rates hit highs in the months following last Autumn’s mini-Budget before drifting back down until recent weeks.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Annuity rates are on the rise again with a 65-year-old able to get more than £7,000 a year from their £100,000 pension. The last time rates were this high was back in December 2022.

"They are still some way off the highs we saw in the weeks following the mini-Budget when the same person could have got an income of £7,586 per year but if we compare them to where they were two years ago (£4,979) then people are certainly getting far more for their money than they once did.

“After years of being consigned to the sidelines of retirement planning, annuities are once again taking centre stage and with more interest rate rises on the horizon there’s every chance we could see further income increases in the months to come.

"For those in need of some level of guaranteed income in retirement then annuities should always be a consideration. However, their reputation for being inflexible and offering poor value for money has made people hesitate. Their improved fortunes will certainly prompt more people to take a closer look.”

Sales of annuities surged more than a fifth during the first three months of this year to reach their highest level for eight years, according to separate data published by the Association of British Insurers last month. 

Between January and March 16,256 annuities were sold.

Annuity premiums for the first quarter of 2023 climbed 22% to reach £1.2bn, the highest value since 2015 when the Pensions Freedoms were introduced.

• Comparisons are based on a single life annuity with a five-year guarantee.