Annuity rates are on course for their second successive year of increases for the first time in more than a decade.
Data from Moneyfacts showed average annuity income rose between 1.4 per cent and 4.8 per cent in the first half of 2018.
Annuity rates have improved strongly since falling to all-time lows in September 2016, following the Brexit referendum, with the average annual standard annuity income increased by 14.6 per cent in the past two years and is now only 1.2 per cent lower than when pension freedoms were introduced in April 2015.
Richard Eagling, head of pensions at Moneyfacts, said: "Despite their much-reduced popularity, annuities remain the only at-retirement product that enables individuals to insure against investment and longevity risk.
"This raises the question as to whether an annuity would be a more suitable option for risk-averse retirees currently holding cash in their drawdown plans for no long-term strategic reason. Here the focus remains on whether rates are sufficiently high enough to tip the balance of power back towards annuities."
The data from Moneyfacts comes after national advice firm LEBC reported a 17.3 per cent increase in its annuity sales since the introduction of pension freedoms.
LEBC reported that, during the time of freedoms introduction, annuity uptake stood at 453 compared to 531 during 2018.
The Moneyfacts data showed average annual standard level without guarantee annuity income for an individual aged 65 increased by 0.6 percent from £473 in April 2018 to £476 in July 2018 for a £10,000 pension pot, and by 1.2 per cent from £2,594 to £2,626 for a £50,000 pension pot.
But the annuity market showed mixed pricing trends, with annuities at higher ages showing smaller uplifts.
Since April 2015, the average standard annual annuity income fell by 3.4 percent at age 75 compared with drops of 2.3 per cent at age 70 and 1.2 percent at age 65.
Consumers opting for a standard level without guarantee annuity at age 65 saw annual income increases of between 0.6 per cent and 1.2 per cent compared to rises of between 0.5 per cent and 1 per cent for those aged 70.
Analysis of pricing trends in the second quarter of 2018 also revealed larger pension pots saw bigger income increases than smaller pension pots, while joint life annuity rates were generally static.
The data from Moneyfacts showed the gap between the income payable from the most competitive standard annuity on the open market and the least competitive annuity has narrowed.
Mr Ealing added: "While the narrower annuity income spread arguably reduces the risk of consumers locking themselves into poorer-value annuity rates, it does raise the possibility that individuals could become complacent, and view a 5 per cent difference as not being enough of an incentive to shop around.
"It is hoped the Financial Conduct Authority requirement that providers must inform consumers about how much they could gain from shopping around and switching provider before they buy an annuity will counter this."