Annuity rates have fallen by 20pc over the past three years to their lowest level ever, wiping £1,600 a year off the income from a £100,000 pension pot. The fall means that people retiring now on occupational or private pensions can expect to receive a far lower income than their counterparts who retired just three years ago. People with final salary pensions are not affected.

Someone who has built up a pension pot worth £100,000 can now exchange it for an income of £6,201 a year, compared with £7,855 in August 2008, according to Hargreaves Lansdown, the stockbroker. This is a fall of £1,654 or 21pc. The figures are for a 65-year-old man buying a pension that will not rise with inflation or pay an income to his wife should he die first. Rates on index-linked and “joint life” annuities have also fallen sharply.

“This is the lowest rate on conventional annuities since the modern annuity market became established in the 1980s,” said Tom McPhail, the head of pensions research at Hargreaves Lansdown. In 1990 the rate was as high as....