Prudential seeks buyers for £45bn annuity business

He said: "I’d be more worried if we begin to see a few more providers go following this announcement.  This may be inevitable because quite simply the demand for annuities is not at the same level anymore.  

"Some providers claimed that annuities sales were down as much as 40-50 per cent post-pensions freedom and this trend is likely to continue.  In addition to this, there were even talks recently of ‘unwinding’ annuity contracts from many years ago which would worry any provider.

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"Should the number of providers shrink further, I’d be concerned about the competitiveness of annuity rates on offer because they are already seen as fairly poor value for money."

Mr Chan added as a result, more and more individuals may shy away from annuities and look at alternatives.  

"Consequently, as the ‘pool’ of annuitants reduce, the benefits of mortality cross-subsidy becomes non-existent and people may get a worse deal overall.

"It’s important to have a competitive annuity market because annuities do have an important role to play for those individuals who require a simple, guaranteed income for life."

Prudential declined to comment.