Annuity incomes are on the up giving a 65-year-old with a pension pot of £100,000 an annual income of £7,144, up 20% from £5,940 a year ago.

The analysis of annuity rates by investment platform Hargreaves Lansdown found that even in the last two weeks, annual annuity incomes have risen by more than £100.

For older retirees, who will receive a higher annual income for the same value pension because they have a lower life expectancy, it is a similar picture.

A 70-year-old will receive £8,020, up 19.6% from £6,704 in June last year. A retiree aged 75 will receive a 15.2% uplift in annual income in just a year from £7,905 to £9,112.

With the prospect of further interest rate rises to come, Hargreaves Lansdown says more increases in annuity income could follow.

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Head of retirement analysis Helen Morrissey said: “After being relegated to the sidelines, annuities are once again taking centre stage and attracting more notice.

“This increase is likely to be in response to the looming [base rate] rate rise we are expecting this week. Interest rates are one factor that determine annuity rates and while it is by no means a certainty, we have seen annuity incomes increase in line with interest rate rises over the past two years. With more increases rumoured to be on the way we could see further income boosts in the coming months.”

An annuity offers a guaranteed income in retirement. But low annuity rates and freedom for pension holders to spend their funds how they like has seen the popularity of annuities drop in recent years.

Morrissey added: “The state pension will offer secure income up to a certain level but if you need more, and you don’t have something like a defined benefit pension scheme, then annuities are an important option.

“We could see further increases in the coming months, but this is not a given. You need to balance taking a wait and see approach with the income you could lose out on by not buying an annuity sooner. You can also spread the risk over time by annuitizing in slices rather than all at once, so you benefit from any future rate increases as well as higher incomes as you get older.”