Annuities remain the most effective and safest form of retirement savings, despite changes made by the Government.
Last year, changes made to give people more choice over how they accessed their pension funds effectively ended the requirement to put retirement savings into an annuity.
However, a report by the Pensions Policy Institute (PPI) has found that it is still the best option for the vast majority of people.
By investing their pension pot in an annuity, pensioners guarantee themselves an annual income, while those with certain medical conditions can plump for an enhanced annuity, which enables them to draw a higher retirement income
The research suggests that only a fraction of people will be able to afford to take advantage of the new rules.
Under the new rules, those aged 55 and over will be able to access unlimited amounts from their pension savings providing they can show they will still be able to call on an income of £20,000 a year or more.
But just 2% of all people aged between 55 and 75 in the UK and 7% of those of the same age that have yet to invest their retirement savings in an annuity would be able to meet such requirements.
"The research shows that the vast majority of people aged between 55 and 75 in 2010 - and particularly lower earners with small pension pots - are likely to find that annuitising is still the safest and most appropriate option for converting their defined contribution pension savings into a retirement income," said Chris Curry, PPI research director.
"The research suggests that initially a relatively small number of individuals will be able to make use of the Government's new flexibilities."
If you're approaching retirement, our annuity best buy charts are an ideal starting point when searching for the best annuity rates.
An online annuity planner service, such as that offered by Premier Retirement Services, should also be considered.
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