Those poorest in retirement are the ones gambling most with pension freedoms, leaving them acutely vulnerable to a downturn, new analysis from retirement specialist Responsible Life has revealed.

Pension freedoms, which was introduced in April 2015, has allowed savers to leave their money invested in the stock market, rather than purchasing an annuity product which offers a guaranteed income during retirement.

However, this method of preparing for retirement has proven to be riskier, as demonstrated in recent months with significant losses being posted.

As a result of this, those with smaller pension pots have less of a safety net should wealth dry up.

Responsible Life highlighted that it is the purchase of smaller annuity products that has collapsed.

The firm found that 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 when conducting an analysis of the latest official FCA data on the product.

In the six months to March 2018, sales of annuities worth between £10,000 and £30,000 were 26.8 per cent down to 9,143 in just two years. The sale of annuities between £30,000 and £50,000 has also plummeted by 27.7 per cent to 6,243.

Despite this, the sale of annuities worth significantly more has risen. Annuity products worth £100,000 to £250,000 have increased in volume by 7.3 per cent during the same period, while those worth more than £250,000 rocketed by a staggering 45.9 per cent.

Commenting, Responsible Life managing director, Steve Wilkie, said: “This is a wake-up call for the government. Sales of annuities have gone off in vastly different directions at either end of the spectrum.

“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.”

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