Investors are being warned against panic decisions on retirement funds as government gilts and annuity rates continue to fall.

People taking income from their pensions must beware the volatility in the market, experts said.

Andy James, head of retirement planning at advisers Towry, said: “Market turbulence is not helpful when looking to take income from investments. I would therefore urge caution to those looking to make withdrawals at the present time and to consider whether now is the right time to be doing this.”

He added: “One of the biggest issues surrounding pensions at the current time is the unknown. No one really knows how things are going to pan out and that will inevitably lead to turbulent markets for the next few weeks and very probably longer.”

Annuity specialist Just Retirement cut annuity rates by two per cent yesterday, with Retirement Advantage already following suit.

Tom McPhail, head of retirement policy at brokers Hargreaves Lansdown, said: “For any investor planning to buy an annuity in the immediate future, it may make sense to do so sooner rather than later.”

The interest rate paid on government bonds is being depressed by the weight of money being poured into the ‘safe haven’ asset. It also spells trouble for final salary pension schemes, because the lower returns make their liabilities more expensive .

Martin Jenkins, pensions partner at law firm Irwin Mitchell, said: “The fall in yields for 10-year government bonds is bad news for defined benefit pensions. Schemes will come under more pressure and we could see more seeking help from the Pension Protection Fund. Firms....will have increase the amount invested into the pensions to protect the level of benefits promised.”