Provider MGM Advantage has found the average annuity for a 65 year old with a £50,000 pension will generate an annual income of £2,786.

In January 2010, the average annuity for a 65 year old with the same pot would have yielded £3,495 a year. This is a reduction of 20% or £14,180 less over a 20 year retirement.

Aston Goodey, distribution and marketing director at MGM Advantage said: “Improving longevity and Solvency II will continue to apply pressure on rates, and we expect a further period of uncertainly as the dust settles on the introduction of gender neutral prices.”

Average annuity rates also fell by 2.5% in the last quarter of 2012. This is the seventh successive quarter rates have reduced, MGM Advantage has said.

Throughout 2012, the average annual income for a 65 year-old man buying a standard annuity also dropped by 11.7%.

Goodey adds: “With annuity rates so low people will be wondering if they have any options. It is hugely important that you shop around for the best deal to make the most of your pension. You should consider all of the options available at retirement rather than be short-changed by your holding pension provider.”