The total value of premiums paid into individual pension annuities grew 4% to £7.4bn in 2025, according to the latest data from the Association of British Insurers (ABI).
This is the highest annual level recorded since the announcement of pension freedoms in 2014.
Despite the rise in overall value, the number of annuities sold fell 2% to 87,600. This shows that people are annuitizing larger pension pots.
Sales of annuities over £250,000 rose by 31%, and sales of annuities valued at over £500,000 rose by 54%. This increase has driven the average annuity value to £84,000, passing £80,000 for the first time, a 7% annual increase.
There was also an 8% rise in those over the age of 70 buying an annuity.
One of the strongest areas of growth by product type was escalating annuities - products that increase payments each. Sales of escalating annuities increased to just over 18,000 in 2025, up 10% from 2024 and the highest level recorded since 2013.
David Cooper, director at Just Group, said he expected the annuity market to continue to grow in 2026
He said: “The total value of annuity premiums rose to another post-'pension freedom' high in 2025, driven by retirees taking advantage of attractive rates available through the year. A regulatory focus on sustainable income and avoiding poor outcomes in retirement is also prompting an adviser shift towards incorporating guaranteed income options in retirement advice alongside other assets.
“The data shows strong demand for guaranteed income for life products that increase payments annually to help protect retirees against inflation eroding their purchasing power over the course of their retirement. There is a clear shift at the upper end of the market for savers with larger defined contribution pots to prioritise security and lock in predictable income streams.”
Just Group’s sales of guaranteed income for life annuity products rose 23% to £1.3bn in 2025.
Clare Moffat, pensions and tax expert at Royal London, also expects annuities to continue to be popular.
She said: “With changes next year to inheritance tax and pensions, there has been an increased interest in using annuities for IHT planning for those approaching age 75. This might be especially useful for couples who live together but aren’t married as joint life annuities are free from inheritance tax on first death. Or for a husband or wife who inherited a large pension and wants a guaranteed income but also the potential to gift annuity income regularly inheritance tax free.”
Bulk annuity activity in 2025 also continued strongly.
In 2025 £38.3bn of defined benefit schemes were secured by insurers to provide long term security for 332,500 people.
While premiums were lower than 2024 (£47.3bn), the sustained number of people gaining long term pension security through bulk purchase annuities remains significant.