Key Retirement Solutions said delaying buying an annuity results in an average of £2,840 in lost income. It said pensioners would have to live another 36 years to make the money back.

It said pensioners should be aware of the potential downsides of delaying purchase alongside the potential benefits of delaying.

The business explained annuity rates have edged up recently on rises in gilt yields sparking hopes of a sustained rise in rates. But with gilt yields remaining low for annuity rates are unlikely to move from all-time lows.

Analysis by Key Retirement Solutions shows a 65-year-old with the median pension fund of £25,000 could expect an annual income of £1,420 now rising to £1,499 if they delayed to the age of 67.

But they would miss out on income of £2,840 for the two years that they have delayed – and would have to live another 36 years to earn that money back, were the only increase to be related to their age.

Sponsored

Click here to view our Sponsored Content Hub

It explained even if annuity rates rose 0.5% during the two years they would still lose £2,840 but the good news is it would only take 14 years to earn back the lost cash.

A rate rise of 0.5% would mean an income of £1,624 at age 67.

The firm said it was important to remember that should someone’s health deteriorate while delaying their annuity purchase a greater income may be generated later should they then qualify for an enhanced annuity.

Dean Mirfin, group director at Key Retirement Solutions, said: “With annuity rates at all-time lows it can seem sensible to delay to avoid locking in an income at the low point.

“But it’s a luxury very few can afford and a strategy that may not pay off. Not only do you have to go without the income but you also have to hope rates rocket and/or your health deteriorates, and if neither happens then you will have to live up to 36 years just to earn back the lost income.”