Pensioners looking to secure a guaranteed retirement income could now receive more than £100 extra a year than they would have just a few months ago.
The increase comes after providers raised the amount they are paying, giving retirees the chance to lock in a higher annual income than they could earlier this year.
Analysis by Moneyfactscompare.co.uk found the average yearly payout has increased by £106 since the beginning of March.
Based on a £50,000 pension pot used to buy a standard single-life level annuity without a guarantee for a 65-year-old, the average annual income has risen from £3,547 to £3,653.
The increase has come in less than six months and has been driven by uncertainty in financial markets.
Long-term gilt yields, which influence how providers set their rates, have risen in recent months.
The benchmark 10-year gilt has climbed above five per cent several times during 2026 and remains higher than it was at the start of the year.
Ongoing conflict in the Middle East and wider political uncertainty have been among the main reasons for the rise, creating continued volatility in bond markets.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said further movement in long-term gilt yields was still likely.
She said: "It is entirely plausible for further volatility to long-term gilts, particularly surrounding the Autumn Budget."
Pensioners could boost retirement income by more than £100 a year
| GETTYShe added that guaranteed retirement incomes could become more popular over the coming years because pension pots will become subject to inheritance tax from April 2027 if left unused.
However, Ms Springall urged retirees to take financial advice before making any decisions, saying it is important to understand the long-term impact on retirement income and choose the option that best suits their circumstances.
The appeal of annuities is expected to grow significantly in the coming years, not least because of looming tax changes.
From April 2027, unused pension pots will become subject to inheritance tax, giving retirees a fresh incentive to convert savings into a guaranteed income stream, effectively reducing the taxable value of their estate.
Long-term gilt yields, which influence how providers set their rates, have risen in recent months
| GETTYData from the Association of British Insurers underscores a trend already under way. Total premiums paid into individual pension annuities reached £7.4 billion in 2025, a four per cent increase on the previous year and the highest annual figure recorded since pension freedoms were introduced in 2014.
"Annuities are due a resurgence in popularity over the coming years as they can be a way to reduce the overall value of an estate, with unused pension pots subject to tax on inheritance from April 2027," Ms Springall noted.
Ms Springall emphasised that annuities come with a range of income structures to suit different needs.
Products can be linked to inflation or set to increase by a fixed percentage each years
| GETTYProducts can be linked to inflation or set to increase by a fixed percentage each year, while those with serious health conditions may qualify for enhanced rates that offer a higher payout.
"Making sure the annuity is set up correctly to suit a pensioner's circumstances will be vital, such as a joint life annuity to continue payments to a beneficiary after death for the rest of their life," she said.
She also stressed the importance of obtaining professional guidance before committing. "Retirees releasing funds out of their pension pots must get good advice to understand the longer-term impact on their retirement income, and whether an annuity is an appropriate choice, or if they should consider an alternative guaranteed fixed term income plan," Ms Springall added.