Annuity rates, which are largely priced on government bond yields and life expectancy, have fallen to record lows over recent years, as the above chart shows. Returns are now so low that many buyers are unlikely to get their initial investment back. But the Bank of England is tipped to raise interest rates significantly over the coming year to combat rampant inflation, which would make annuities better value.

Rising payouts could bring them back into favour relative to drawdown accounts, according to William Burrows of Retirement Planning Project, a financial planner. Mr Burrows said annuities could pay out an extra £40,000 over a typical 20-year retirement if Bank Rate reached 1pc by autumn 2023, as predicted.

Even if this failed to materialise, an annuity that might appear to be relatively poor value at retirement age could look much more attractive later in retirement, Sir Steve Webb of LCP said.

“For a wide range of people, there could come a point during retirement when a switch to an annuity gives them better outcomes overall. It would be wrong to write off annuities altogether,” he said. This is irrespective of pension-pot size, he added.

A 60-year-old with a £150,000 pension who used their whole pot to buy an annuity would get a yearly fixed income of £5,825, according to Legal & General, an annuity provider. The same person buying a £150,000 annuity five years later, at 65, would get around £1,000 a year more, at £6,840.

Anyone who is willing to take on high-risk investments and invests three quarters of their money in the stock market should hold out until age 70 before buying an annuity, because they can grow their pension more quickly in the early years, said LCP.

On the other hand, those who are risk averse are advised to move out of drawdown much sooner, at age 64, as they are unlikely to make large enough returns to justify staying invested in the stock market.

Aside from the perceived poor value of annuities, retirees are put off them because the income is lost on the death of the buyer (or their partner, if a “joint life” annuity is bought). Money held in drawdown, however, can be passed down the generations indefinitely. Unspent pensions are free of inheritance tax and are only taxed at the marginal income tax rate of the recipient. In the case of a grandchild, this is likely to be 0pc. If the pension holder dies before 75, no tax is due at all.

But Sir Steve said it was more sensible to pass on wealth during your lifetime and inheritance considerations should not be a reason to avoid annuities.

Instead, savers with a large pension should pass down their wealth while they are still alive from the annuity payments they receive, he said.

“Giving while living probably benefits the next generation at an age when it is more helpful to them, and if all they really want is to leave money when they die they could take out life insurance that gives a guaranteed sum to the heirs, whereas drawdown balances are incredibly unpredictable,” he said.