The income people can expect to receive from their pension fell for the third consecutive year during 2010, research indicated.
Annuity rates for people aged 65 with a 10,000 pension pot, who do not want their retirement income to rise in line with inflation, dropped by 2.7 per cent during the year, according to Investment Life & Pensions Moneyfacts.
The group said the fall would have been even steeper if annuity rates had not rallied during the final two months of the year, after hitting the lowest level since records began during the autumn.
But the overall drop during the year means a 65-year-old man with a 10,000 pension pot can now expect an annual retirement income of just 607 on average, while a woman of the same age can expect only 568.
The fall in annuity rates was even steeper for best-buy deals, with these dropping by nearly 5 per cent for men and 4.1 per cent for women.
The research is bad news for people nearing retirement, who are also likely to have suffered a fall in the size of their pension pot due to stock market volatility. Annuity rates have been falling steeply in recent years due to a combination of increased life expectancy and falling gilt yields.
The income a man aged 65 can expect to get from an annuity purchased now is 46.6 per cent lower than it was in 1995, at 607, compared with 1,138. Women have seen a fall of 43.7 per cent in the annual pension they can get.
Richard Eagling, editor of Investment Life & Pensions Moneyfacts, expects annuity rates to continue falling going forward.
He said: "The recent annuity rate rally is unlikely to last much longer, and could ultimately prove nothing more than temporary respite from their downward trajectory.
"One of the key influencers of annuity rates are the yields on gilts and corporate bonds, and unless these continue their recent upsurge for a sustained period, annuity rates are likely to remain in the doldrums."
But the research found that rates for enhanced annuities, which offer a higher income to people with certain health conditions or who smoke, had fallen less steeply than conventional annuity rates, dropping by 2.1 per cent for men and 1.4 per cent for women during the past year.
Nationwide steps up loan rate battle
Competition in the personal loan market intensified this week with the launch of a market-leading product by Nationwide.
The group is offering a rate of 7.2 per cent to current account customers borrowing between 7,500 and 14,999 over a period of up to five years, and one of 7.3 per cent to other consumers
The deal, which went straight to the top of the best-buy tables, is the latest in a string of competitive loan rates to be launched in the past two weeks.
More than half a dozen major loan providers have slashed the rates they charge since Christmas, and there are now around 10 different products available for less than 8 per cent.
January is traditionally a busy period for the personal loan market, as people take stock of their finances and often decide to take out a loan to consolidate their credit card debt. But the recent round of price cuts also suggests lenders are becoming more willing to advance money through unsecured loans.
pension headache: Many people are expected to be worse off in retirement as annuity rates continue falling.picture: john stillwell/pa wire