Summary

Annuity sales in the UK have rebounded sharply since 2022, with ABI data showing 2024 sales reaching around GBP 7 billion, a 34% increase year on year and a ten-year high.

The driver has been a higher Interest Rate environment, with the Bank of England Base Rate at 3.75% in May 2026 and long-dated gilt yields well above the levels seen during the post-2009 era.

Higher rates raise the income insurers can offer for a given pot, prompting more savers - particularly aged around 65 - to lock in guaranteed retirement income.

Key Takeaways

• ABI 2024 figures show pension annuity sales reached around GBP 7bn and 89,600 contracts, the highest in a decade.
• Long-dated gilt yields, not Bank Rate alone, are the principal driver of annuity pricing.
• Bank of England base rate was held at 3.75% at the April 2026 MPC decision, with rate expectations affecting pricing.
• Joint-life, escalating and enhanced annuity uptake has grown alongside total sales.
• Shopping around and using Pension Wise remain key, regardless of the rate environment.

Are Annuities Making a Comeback as UK Interest Rates Shift?

Annuities, once written off as an afterthought of the pension freedoms era, are firmly back on the UK retirement income agenda. The Association of British Insurers reported that individual annuity sales reached around GBP 7 billion in 2024 - a 34% jump on 2023 and the highest annual figure in a decade. The number of pension annuity contracts sold rose by 24% to roughly 89,600, with 65 remaining the most common age at purchase.

Behind those figures sits a sharp shift in the interest rate environment. The Bank of England, having lifted Bank Rate from 0.1% in late 2021 to a peak of 5.25% in 2023, held the rate at 3.75% at its April 2026 Monetary Policy Committee meeting. Long-dated UK government bond yields - the building blocks of annuity pricing - have remained materially higher than during the post-financial-crisis decade.

This article examines why annuities are making a comeback, how interest rates feed through to quoted incomes, what the latest ABI data shows about consumer behaviour, and what the FCA's Retirement Outcomes Review means for shoppers in 2025/26. It is intended for general information only.

Why the UK Annuities Comeback Is Happening Now

Between 2010 and 2021, annuities fell out of fashion. Ultra-low interest rates produced low offered incomes, and the 2015 pension freedoms allowed savers to access drawdown without compulsion. Annuity volumes fell sharply after 2015 and remained subdued for years.

The shift began in 2022, when the Bank of England started raising Bank Rate to tackle Inflation. Long-dated gilt yields rose substantially, lifting the income insurers could offer. ABI sales data shows the trend accelerated through 2023 and 2024, with annuity volumes and values both setting post-freedoms records.

The 2024 numbers also coincide with larger pension pots from auto-enrolment maturing into retirement age, and renewed interest in certainty after years of Equity Volatility, inflation shocks and rising household bills.

How Interest Rates Drive Annuity Pricing

Insurers typically back annuity liabilities with portfolios of UK Government Bonds (gilts) and other fixed-income Assets. The yields they can lock in determine the rate they can offer to new annuitants. Long-dated gilt yields - particularly at 15, 20 and 30 years - are usually more relevant than Bank Rate itself.

The Bank of England influences the Yield curve through Bank Rate, quantitative tightening and forward guidance. When markets price in higher-for-longer rates, the long end of the curve typically firms, and annuity quotes follow.

This is why annuity rates can vary noticeably from week to week, even without an MPC meeting. Inflation prints, fiscal events, Debt Management Office gilt issuance and global rate moves all feed through.

What the 2024 ABI Data Tells Us

• Around GBP 7 billion of individual annuities purchased in 2024, up 34% on 2023.
• Approximately 89,600 contracts sold, the highest in a decade and 24% higher year on year.
• Roughly 69% of buyers exercised the open market option to switch provider, up from 64% in 2023.
• Around 36% of purchases were preceded by financial advice, up from 29% the prior year.
• Joint-life, escalating and enhanced annuity uptake all increased, suggesting more thoughtful shape choices.
• 65 remained the most common age to buy, accounting for around 20% of all sales.

What This Means for Retirees in 2025/26

A higher-rate environment does not guarantee that annuity rates will rise further; it simply means the starting point is more attractive than in the 2010s. Quoted rates change continually and could drift down again if expectations for Bank Rate ease.

Buyers considering a lifetime annuity in 2025/26 should focus on what the contract delivers given their personal circumstances - age, health, dependants, inflation concerns - rather than trying to call the top of the rate cycle.

Comparing quotes via MoneyHelper's annuity comparison tool, a regulated broker or an FCA-authorised adviser remains essential. The open market option is enshrined in the ABI Code of Conduct on Retirement Choices.

FCA Oversight and the Retirement Outcomes Review

The FCA's Retirement Outcomes Review, originally published in 2018 and updated in subsequent thematic work, drew attention to non-advised drawdown decisions, default Investment pathways and the importance of shopping around for guaranteed income.

Subsequent rules introduced investment pathways for non-advised drawdown customers and reinforced the requirement to highlight the open market option for annuity purchasers. Consumer Duty, in force since 2023, places further responsibility on firms to deliver good outcomes.

Beyond Headlines: Shapes That Have Gained Ground

ABI commentary alongside the 2024 sales data noted growth in joint-life annuities (covering a partner), escalating annuities (with RPI, CPI or fixed-percentage increases) and enhanced annuities (underwritten for health and lifestyle).

This suggests buyers are not simply chasing headline rates but tailoring contracts for inflation protection, dependants and personal medical profile. These features reduce starting income but can improve long-term resilience.

Fixed-term annuities have also attracted attention as a way to lock in current rates for 5 to 15 years without committing for life.

Risks of Reading Too Much Into a Comeback Narrative

Press coverage often frames annuities as 'back' or 'better value', but pricing is dynamic and personal. A comeback in aggregate sales does not mean any particular individual should buy now.

Annuity decisions are largely irreversible. Pension Wise guidance and, where appropriate, FCA-authorised advice are critical before committing - especially when partly inflation-linked income, joint-life cover or value protection are being considered.