After a decline in annuity sales following the pension freedoms, the market seems to have levelled off with purchases accounting for around 10 per cent of total market share, according to the Pensions Policy Institute.

A PPI briefing note published yesterday (May 26) showed that the average pot size used for purchasing an annuity has risen to £71,000 from £37,000 in 2015.

But in recent years, more pots under £10,000 have been used to buy these products. These small pots accounted for 16 per cent of total annuity purchases in 2016-17, whereas in 2020-21 they were used to buy almost a quarter of all annuity purchases.

Claire Altman, managing director of individual retirement at Standard Life, part of the Phoenix Group, noted that this is an interesting time to look again at the role annuities can play.

“With [defined benefit] provision continuing to decline, stock market volatility on the rise, and people continuing to underestimate their own longevity, annuities can play a valuable role in providing income certainty,” she said.

“However, if this market is set to grow again it will need to address the misconceptions that many people hold about annuities and make a case for how they can be used in combination with drawdown, rather than as an alternative to it.”

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