Gary Smith, Tilney’s associate director of Financial Planning, said the recently announced Bank Rate cut is likely to have a far greater impact on those seeking to buy an annuity than on savers.

He said: “Ultimately the attractiveness of annuities has gradually been reduced due to a combination of the introduction of pension freedoms legislation and a prolonged period of low interest rates and Gilt Yields. With little expectation of an increase in interest rates in the short term, the future for annuities seems very gloomy indeed.”

He said: “Annuity rates were already negatively being impacted by market jitters, including the uncertainty created by the vote for Brexit, as nervous investors have seen Gilts as a safe haven.

“As Gilt prices have rallied, this has in turn decimated Gilt yields, with 10-year Gilts now yielding 0.55% at a time when inflation is expected to rise.

“The effect on those about to purchase an annuity is devastating: I have already experienced a reduction of 5.4% in the annuity rate quoted for a client, and this reduction occurred in a short period between 6th July and 9th August 2016.

“The annuity quote was obtained for a 65 year old male who was seeking to purchase a joint life level annuity, including a 10-year guaranteed period and a 50% spouse’s pension.”

A further rate cut, as the Bank of England has already suggested may happen, would adversely affect those either at or approaching retirement, and who want to avoid the risk and charges associated with a pension portfolio invested in the markets through drawdown, he said.

Mr Smith said: “Those affected could find that they will receive a much lower income than they were expecting or having to increase contributions ahead of retirement to offset the reduction in annuity rates, although this could prove quite a costly exercise and this may not be an option because of the unhelpful recent reduction in the lifetime allowance, a decision which the reconstituted Government really should reappraise.

“Indeed a £1 million purchase of a joint life annuity for a 65 year old, increasing by RPI will currently provide a £25,120 annual income or £18,843 if the saver takes their 25% tax free cash which is well below the average UK salary.”