Falling annuity rates coupled with inflationary pressures have been the primary drivers for the growing interest in higher risk annuities, according to one provider.

MGM Advantage – itself a provider of the products – said retiring investors are increasingly willing to allocate their pension pot to riskier investments in return for a minimum income guarantee.

The company said a recent increase in sales of its Flexible Income annuity underlines this statistic.

Aston Goodey, sales and marketing director at MGM Advantage, said there is considerable interest in alternative retirement income solutions that can provide some protection against inflation with the prospect for income growth.

He explained, ‘Demand is soaring as more people recognise the need to mitigate against the impact of both rising inflation and falling annuity rates.’

Goodey warned that, as the cost of living increases, there will be even greater strain on household incomes and that this will hit those in retirement hardest.

MGM’s research suggests that UK households need to find an extra £35 billion to maintain the standard of living enjoyed just 12 months ago.

For households where the main occupants are aged 65 -74, the corresponding figure is £2.8 billion and where they are aged 75 and over, it is £2.19 billion.

It warns that to maintain the same living standards as a year ago, the UK population (61,792,000) would need to spend an estimated additional £571.85 per person.