Retirees have been urged to shop around for the very best annuity deals after it was revealed the income delivered by conventional annuities has dropped by more than 4% over the past three months.
The latest MGM Advantage Annuity Index, which is based on the analysis of Investment Life and Pensions Moneyfacts data, showed conventional annuity rates had dropped by 4.15% since June.
The rates paid on enhanced annuities, which pay out more than their conventional counterparts to people with certain illnesses or who smoke, slipped 2.33% lower.
The resultant 3% drop in overall average annuity rates is the largest decrease seen since September 2010, while it also means rates have fallen by 5.79% since June 2009.
Elsewhere amongst the data, the importance of getting the very best annuity was revealed.
According to the calculations, a male with a £50K pension pot could expect to receive an average yearly income of £3,239 if he opted for one of the best standard annuities.
However, if the same man settled for one of the worst annuities currently on offer, his annual income would be just £2,831.
Over the course of an average retirement, the annual difference of £408 adds up to a grand total of £6,938 in lost income.
"These findings will put even more pressure on those people in or approaching retirement as they are faced with the reality of living longer, rising inflation and falling annuity rates," said Aston Goodey, sales and marketing director at MGM Advantage.
"And, the market volatility of recent months and weeks means the size of consumer pension pots have also fallen - giving this group of customers even less money with which to buy an annuity in order to generate an income for the rest of their life.
"Consumers really need to do their homework at this crucial stage of their life and that's why simply drifting into an annuity with their existing pension company can be so financially damaging."
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