The introduction of pension freedoms in 2015 has seen the number of annuities purchased plummet from 353,000 in 2013 to just over 60,000 in 2020/21, according to a briefing note by research charity the Pensions Policy Institute (PPI).

Annuities are purchased with retirement savings and then provide fixed payouts for life.

People underestimating how long they will live and negative perceptions of annuities are further reasons behind why some retirees are reluctant to buy, the research suggested.

Since increased flexibility with savings was introduced, annuities tend to be purchased by retirees with much higher levels of savings.

In 2014, the year before freedom and choice was introduced, an average pot size of just under £37,000 was used to purchase an annuity. Since then, the size of pots used to purchase annuities has risen steadily to an average of over £71,000.

Older retirees are also more likely to buy annuities with a rise in the number of over 75s buying the products. This suggests people may appreciate the value of a guaranteed income more as they age, the PPI said.

Mark Ormston, director of propositions at Retirement Line added: “There are many reasons why people may look to annuitise later in life, including the fact that annuity rates improve with age.

“At present, a 65-year-old can expect an annuity rate of around 6%, whereas, a 75-year-old can expect an annuity rate closer to 8% (providing 33% higher yearly income than at age 65).”

Kathryn Fleming, partner at Hymans Robertson, added: “Annuities are often seen as one of the least popular of the pension freedom options, so it is fantastic to be able to support this PPI research and helping to raise awareness of where they can add value.

“An annuity can have an important role when combined appropriately with the other pension options as part of an individual’s retirement plan.”

The PPI said more data is needed on the effects of gender, ethnicity, family and housing to determine attitudes towards choosing retirement products.

Mark Baker, senior policy researcher at the PPI, said: “There is no doubt that guaranteed retirement income products will continue to play a role in the retirement landscape, but their significance and use will change…

“Tackling the negative attitudes many people hold towards annuities may also be a key element of shaping a future where people who would benefit from a guaranteed retirement income have both the access and the inclination to do so.

“In order for the market to respond well, more understanding of how factors including gender, ethnicity, family and housing determine people’s attitudes and behaviours will be necessary as we currently have very little evidence as to the roles that these factors play.

“Improved data on behaviour and attitudes collected at a national level will be a necessary building block for designing the future.”