For annuity rates to hit 14% the Bank would need to raise the base rate to 1.5%, according to Canada Life.

Annuity rates have already risen on average 5.4% in January, in response to the base rate rise in December.

Canada Life expects rates to rise further this month following the base rate rise of 0.25% last week.

If annuity rates rise by 14%, that would add £700 a year extra income to an annuity of £100,000.

Nick Flynn, annuity sales director at Canada Life, said the insurance and retirement provider has seen more quote activity than in previous years.

He said: “We have already responded to the base rate rise by increasing our annuity rates twice in January. We are carefully monitoring yields and will move when we are able to pass on any improvement to our customers.

“Although it’s difficult to predict how annuity rates will change in the future, if interest rates continue to increase as predicted then its great news for those looking to purchase an annuity. Annuity rates could improve by 14% if interest rates hit 1.5% this year.

“We’ve seen more quote activity in January than in previous years, and this could be down to pent up demand as people have postponed retirement due to the pandemic,  working from home and the furlough scheme.”

Last month, national Financial Planning group Continuum predicted that annuities may see a return to favour as advisers try to cope with the impact of soaring inflation on their clients.

Annuities have declined significantly in popularity in recent years as clients have moved towards income drawdown products following the Pension Freedoms.

Figures from the FCA’s 2020/21 FCA retirement income data published in December revealed that the number of annuities purchased fell by 13% during the year.