Retirees have been told they must shop around for the best annuity deals after annuity rates continued to drop lower over the past three months.
According to analysis of Moneyfacts' data by MGM Advantage, the average conventional annuity rate fell by 1.04% between September and December.
Meanwhile, the average rate on an enhanced annuity, which pays out a higher amount of money to people with certain medical conditions or lifestyle choices (for example, smoking), fell by 2.12%.
The latest reductions mean that since June last year, the average conventional and enhanced rates have fallen by 7.94% and 7.32% respectively.
The research also revealed that the gulf between the income paid on the best and worst conventional annuities continues to grow.
Furthermore, the difference between taking an average standard annuity and an average enhanced annuity now stands £11,682 over the course of an average male's retirement on a pension pot of £50,000. This amount grows to £13,148 for women.
Craig Fazzini-Jones, director at MGM Advantage, said the findings were very alarming.
"People in retirement are living longer with an ever diminishing pot of money," he added.
"Given this, the need to shop around for the best possible annuity rate is becoming ever more imperative."
The easiest way to find the best annuity deals is to take a look at our annuity best buy charts or use an online annuity planner service such as that offered by Premier Retirement Services.
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