The Liberal Democrat spokesman for work and pensions has asked the government to revive plans for a secondary market for annuities.
In a letter to secretary of state for work and pensions Esther McVey, Stephen Lloyd called for the government to investigate whether it should revive this policy because consumers were losing purchasing power.
Mr Lloyd said inflation remained above the Bank of England’s 2 per cent target while the yield on the 10-year government bond, which annuity rates are typically priced from, is about 1.23 per cent, half the rate of inflation.
He said the practical effect of this was that the income received by annuitants had less purchasing power now than when the product was bought.
Mr Lloyd said: "By introducing the pension freedoms, the Liberal Democrats ensured no one would have to buy an annuity, particularly if the annuity was an inferior product to other options they had.
"Allowing those who had already bought annuities to sell them on the market of they so wish is the next logical step."
But he said any plan must ensure that consumer rights are protected from potential scammers.
Mr Lloyd's party was in government in coalition with the Conservative Party when pension freedoms were introduced in 2015 and Steve Webb, the pensions minister at the time, was a Lib Dem MP.
A secondary annuity market, first proposed in December 2015, would allow people drawing annuities to sell their contracts, extending the pension freedoms announced in the Budget three years ago.
But many providers warned widescale fraud could take place, especially if the secondary annuity market evolved into something much bigger than intended.
The Treasury said it would scrap the plans just months before implementation, saying the consumer protections it would have to implement would undermine the market's development.
The government should formally investigate the creation of a secondary annuity market and report back on its conclusions, he added.
Last month, a movement called Your Pension Your Choice launched a campaign urging the government to allow five million pensioners that retired before April 2015 to sell their annuities but City minister John Glen said there were "no plans to review the decision".
He said: "It became increasingly clear that the conditions required for a competitive market to emerge, with multiple buyers and sellers of annuities, could not be balanced with sufficient consumer protections."