The Report revealed contrasting pricing trends in the annuity market during 2017 with the enhanced annuity market – designed for those with a life-limiting condition, such as diabetes or heart disease – has been hit the hardest since pension freedoms were introduced.

The report shows that standard annuity income rates are improving. Over 2017, the average annual income for a standard level without guarantee annuity for a 65-year-old increased by 1.07% based on a £10,000 pension pot, and by 1.66% for a £50,000 pension pot. It was the first calendar year since 2013 that standard annuity rates increased.

In contrast, pricing for enhanced annuities fell by between 4.8% and 5.8%, with larger cuts for older pensioners. At the higher age of 70, average enhanced annuity income fell by around 6.8%, while at age 75 the reduction was even greater, up to 9.9%. Overall, average enhanced annuity income decreased in all but 17 of the 170 enhanced annuity scenarios analysed during 2017.

This means the uplift offered by an enhanced annuity is now significantly reduced, falling from 16.7% to 12.1%. That said, it is still worth retirees checking whether they have a qualifying condition.

Richard Eagling, head of pensions at Moneyfacts, said: “Before pension freedoms were introduced the enhanced annuity market was functioning well, with healthy competition ensuring typical uplifts of around 21%. However, it is difficult to escape the conclusion that the enhanced annuity market has been more adversely impacted by pension freedoms than the standard annuity market, meaning poorer retirement outcomes for those with shorter life expectancies retiring now than pre-April 2015. Nevertheless, it still remains the case that enhanced annuities offer valuable extra income for those who qualify for them, so they should not be overlooked.”