The average annual income generated by a standard annuity for a 65-year old man fell by a massive 11.5% during 2012, new research from Moneyfacts shows.
According to its figures, this is the biggest annual fall since 1998, when pensioners suffered as typical annuity incomes tumbled fell by 13.7%.
The news for female pensioners is not quite so bad. The annuity income for a 65-year-old woman fell by 6.1% last year.
However, it would have been a bigger drop had women not benefited from the European Court of Justice (ECJ) ruling on gender neutral pricing coming into effect on December 21, 2012 and preventing companies from penalising them for generally living longer than men.
Richard Eagling, head of pensions at Moneyfacts, said: "Sadly, it is fair to say that 2012 has proved to be another poor year for annuity rates."
These figures will dismay older Britons approaching pension age, especially coming as they do on top of a long line of falls.
The income received by a 65-year-old man purchasing a standard, level annuity has shrunk in each of the last five - and 15 of the last 18 - years.
Figures from pension provider Prudential show that this year's retirees expected to receive £3,400 a year less than workers who retired in 2008.
And the Moneyfacts research reveals that these falls started in 2008, when income levels dropped by 2.2%, continuing with an 8.7% fall in 2009, a 2.7% reduction in 2010 and another big drop of 8.7% in 2011.
For many, the ongoing poor performance of annuities will lead them to question whether they can still be viewed as a good way to fund retirement.
Here, we look at why rates - and incomes - are falling and ask whether annuities remain a good investment.
Why are annuity rates falling?
The 11.5% fall in average annual income from a standard annuity recorded in 2012 was due largely to the low level of gilt, or government bond, yields.
Other contributing factors included uncertainty over the Eurozone and the introduction of the ECJ ruling on gender neutral pricing.
Eagling said: "Record low gilt yields sparked by further Quantitative Easing and uncertainty over the Eurozone combined with the switch to gender neutral pricing led to a high volume of repricing amongst annuity providers throughout 2012."
Are annuities still a good investment?
A pension annuity is a product sold by insurers that provides a retirement income in the form of regular payments for the rest of the annuity holders life.
Most people buy one at some point, but increasing numbers of older Britons are deferring annuity purchase in the hope that rates will recover in the future.
The drawbacks to this approach include that you will usually have to choose between risking your savings by staying invested in assets such as equities or accepting the pitiful returns available from cash accounts at the moment.
Ros Altmann, the director-general of Saga, is a fan, though. "It's welcome that people seem to be waking up to the poor value offered by current annuity rates and delaying purchase when they can," she said.
When you do come to buy one, you can also boost your income by up to 20% by searching the market for the best deal - and choosing the best sort of annuity for you.
Those with serious medical conditions, for example, could get a much better rate with an impaired-life annuity, while those concerned about inflation can choose an annuity offers larger payments further down the line.