Annuity rates have plummeted 9.3 per cent over the past three years, meaning less money for people about to draw their pensions, according to the latest results of MGM Advantage's Annuity Index.

Since September 2011, conventional annuity rates have fallen by 4.7 per cent.

Meanwhile, enhanced rates that are offered to smokers or people with poor health have gone down by 2.45 per cent.

The majority of people about to retire still buy an annuity – that provides a lifetime income – with their pension pot, so the latest news comes as another blow to older people who are already suffering from stock market falls and high inflation. 

Aston Goodey, sales and marketing director at MGM Advantage, says: 'These findings are shocking and will put even more pressure on those people in or approaching retirement.

'Since launching our Annuity Index in June 2009, it has fallen eight out of the nine times it has been updated. With the continued economic uncertainty, the long-term outlook for conventional and enhanced annuity rates is difficult to forecast.'

The MGM Advantage Annuity Index also showed that the difference between enhanced and conventional annuity rates on the market has become more prominent, with the best enhanced annuity offering a 21 per cent better rate than the worst conventional annuity.

This was written for our sister website, Moneywise