Poorer pensioners are the ones gambling most with pension freedoms leaving them acutely vulnerable to a downturn, according to analysis by retirement specialist Responsible Life.
Pensions freedoms, which were introduced in April 2015, mean that, instead of buying an annuity that offers a guaranteed income during retirement, pensioners can leave their money invested in the stock market.
The number of annuities bought with a value between £10,000 and £50,000 has plunged by more than a quarter in just two years, analysis of the latest official FCA data on annuity shows.
In the six months to March 2018, sales of annuities worth between £10,000 and £30,000 were down to 9,143, 26.8 per cent less than two years ago.
Sales of annuities worth between £30,000 and £50,000 had also plummeted 27.7 per cent to 6,243.
Meanwhile sales of annuities worth significantly more have increased.
Those worth £100,000 to £250,000 increased 7.3 per cent in that period while those worth more than £250,000 rose an incredible 45.9 per cent.
Steve Wilkie, managing director of Responsible Life, said the data should act as a wake-up call for the government as sales of annuities have gone off in vastly different directions at either end of the spectrum.
Mr Wilkie said: "It is only a matter of time before a great many poorer pensioners who abandoned annuities in favour of riskier bets on the stock market come unstuck.
"Many retirees will be launching themselves headfirst into financial difficulty because they took a risk with what little they had."
Alistair Cunningham, financial planning director of Wingate Financial Planning, said from his experience while those with smaller pots were increasingly looking at drawdown as a more rewarding retirement route than an annuity, he has not seen any greater appetite for annuities from those with larger funds.
Mr Cunningham said: "In fact, with the overwhelming demand for transfers out of defined benefit schemes it seems that guarantees are very much out of vogue, a trend with which I have some concern."