Punter Southall, the actuarial consultant, has condemned the UK Inland Revenue for failing to support an increase in the age at which annuities have to be purchased from 75 to 85. Returns on annuities are low and the period of remaining life, which annuities need to cover, has fallen dramatically.

Punter said: "The Inland Revenue seems to have a blind spot in this area. It remains wedded to compulsory purchase annuities because it thinks that otherwise people will use their pension to pass money on to the next generation. It is time for the Revenue to leave the compulsory annuity behind and look towards a flexible system."