Annuity rates have also fallen, making them less attractive for those preparing to live for another 20-30 years in retirement.
The Iress Retirement Report reveals the highest average annuity rate of the past three years was 5.88 per cent and the lowest 3.74 per cent.
A series of economic events has combined since 2014 to drive down the rates on offer.
He explains: “Since pension freedoms, annuity rates have been in decline, with the UK’s Brexit decision putting further downward pressure on interest rates, gilt yields and hence annuity rates.”
Ultimately, the drop off in sales of annuity products over the past nearly two years has forced several providers to exit the market altogether, with Prudential the latest to announce it is doing so.
“Providers have tried to replace the lost business through corporate bulk annuity sales but there has been some fall out in the market,” says Mr Pennie.
“Standard Life and Prudential are two of the big names to stop offering annuities and LV= have also withdrawn. Legal & General have reviewed their continued participation and limited their offering. In addition, two of the largest specialist annuity providers, Just and Partnership, have had to merge in recent months.”
Prudential has launched an annuity comparison service for existing pension customers which it confirms will be “phased in” during 2017.
In a statement, the firm explains: “In addition to cash and income drawdown options that we provide to customers, this new service will facilitate direct access for Prudential customers to a wider range of annuity providers, while extending the choice available to them if choosing to secure all or part of their retirement income through an annuity.
“The Prudential annuity panel at launch comprises Aviva, Just Retirement, L&G and Retirement Advantage.”
A Prudential spokesperson adds: “We have made this decision due to regulatory and other changes in the retirement market. In launching this service, we still want to ensure our customers who choose to annuitise are aware of their options and the new service will give them access to a limited panel of annuity providers from across the market.”
Shortly after Mr Osborne’s pensions shake-up the government proposed to create a secondary annuity market.
The government’s plan was to launch this market in April 2017 but the idea was eventually scrapped entirely in October last year.
Had it gone ahead, it would have meant annuity holders could have cashed in their annuity with their provider.