According to research by Towers Watson compared to the first three months of 2015, total quarterly premiums fell by a further 10% in the second quarter of 2015 to £241.5 million.

Combining this latest drop with quarter-on-quarter reductions of 20% in the first quarter of 2015, and 36% and 13% in the third and last quarters of 2014 respectively, enhanced annuity sales were 60% lower in the second quarter of 2015 compared to the same period last year.

This trend directly follows George Osborne’s March 2014 Budget announcement on new pension freedoms, which became available to retirees with defined contribution (DC) pension pots in April 2015.

However, the rate of decline has slowed in 2015 and the average amount used to purchase an enhanced annuity is now 14% higher than a year ago.

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In contrast to enhanced annuities, unit-linked guarantees (often known as “variable annuities”, which provide regular income payments guaranteed not to fall but may also rise if investments perform well) have held up strongly in spite of the retirement market reforms. Overall, premiums have actually increased by 14% in the second quarter of 2015 compared to the previous quarter. The average premium per policy has also increased and is now 18% higher than it was at this time last year.

Mike Armitage, a senior consultant at Towers Watson, said: “The new pension flexibilities introduced in April 2015 are having a major impact on the market for enhanced annuities. But we also see providers working hard to position themselves to adapt to these new conditions and provide appropriate retirement solutions for customers in the future.”