Pension annuities in 'freefall' - Telegraph Joanne Segars, chief executive of the National Association of Pension Funds (NAPF), which represents the pensions industry, said that annuities have taken a "hammering." Lord McFall of Alcluith, the former chairman of the Treasury Select Committee, said that the UK is "digging a pension pit" for itself. Over the last three years, annuity rates have fallen by a fifth, MGM Advantage said. The 20 per cent fall means that the annual payout that a £50,000 pension pot would buy has fallen by £630 in three years. Pension groups argue that the Bank £375 billion QE programme has triggered a dangerous spiral for retirement income as it has reduced annuity rates. QE works by electronically creating new money which is used to buy government bonds, known as gilts. Increased demand for gilts pushes down the interest rate paid on the loans, known as the yield. Because pension funds" money is heavily invested in Government bonds, the returns that the funds get is reduced, thereby lowering the amounts they are able to pay out as annuities. Ms Segars said that the value of annuities is "unlikely to improve any time soon." She said: "With another round of quantitative easing being signalled, annuity rates could fall even further. Those who need to get an annuity must scour the market for the best deal. Spending time shopping around can make a big difference, and too many people do not realise that health and lifestyle factors might get them an enhanced rate. Aston Goodey, distribution and marketing director at MGM Advantage said that annuity rates are in "free fall" and that he expects further falls in the coming months. Mr Goodey said: "Savers are caught between a rock and a hard place, with annuity rates at an all time low. Some people may be in the position to hold off from converting their pension into an income in the hope rates will recover. Others will need to generate an income now. Lord McFall said that trust in pensions should be improving due to the Government's recently-launched auto-enrolment scheme, which will see up to 11 million people enrolled in a workplace pension. However he said that the reverse is happening. At a time when auto-enrolment has been introduced and the strategy has been to increase confidence in the pension market, the figures are going the other way in reducing people's confidence and expectations as to what they'll get. Therefore I think this is an issue which the pensions minister should be looking at. Particularly how you provide people with some comfort as to the risks that they are exposed to. An initiative from the Government is needed," said Lord McFall.