Pension savers are being urged to consider alternatives to buying a lifetime annuity with their funds, after rates suffered their biggest monthly fall on record – to reach a new low. In August, the typical annuity income a 65-year-old male could expect to buy with a £100,000 pension fund fell by 5 per cent, or more than £300 per year, according to new figures released this week (see table).

This would mean £9,000 less income over a 30-year retirement for a pension saver who locked into an annuity rate in August, instead of July. Last month’s drop in annuity rates is linked to the record low returns that insurers are now receiving on gilts – the government bonds that are used to back annuity payments.

 Financial Times