Savers should resist buying an annuity at present as low rates are making it difficult to achieve good returns after fees are taken into account, according to an adviser firm.

Specialist pensions advisers Tideway Investment Partners warned it is difficult to achieve a good return from annuity products at present due to record low rates, with people having to live longer until their late 80s to make their money back.

Figures from Moneyfacts, published earlier this month, revealed that income from an average annual standard level without guarantee annuity hit £410 on September 10, 2019, a decline of 10.2 per cent from January 1, 2019.

This was based on income received by a 65-year old with a £10,000 pension pot buying a single life annuity.

The drop means the average annuity income is now 1.2 per cent lower than its previous all-time low recorded in September 2016, following the Brexit referendum.

James Baxter, partner at Tideway Investment Partners, said annuities were currently an expensive way to convert pensions savings into lifetime income at retirement, highlighting that people now needed to live until at least 86 on a fixed annuity and 89 on a 3 per cent per year escalating annuity to make their money back.

A fixed annuity pays the same pension payments year after year for the rest of a person’s life, whereas an escalating annuity increase in line with an inflation index or at an agreed fixed rate each year.