Sales of annuities have dropped by more than a third since the Budget in March, data from the Association of British Insurers has revealed.
The number sold fell by 37.5% between the first and second quarter of the year to an annualised rate of fewer than 200,000 - down from 420,000 in 2012.
Since the Budget, which allowed savers to access personal pensions of up to £10,000 without having to buy an annuity, the average size of annuities bought has increased to £38,600.
Some 29% of all annuities sold were enhanced annuities - which pay a better rate of income because of the customer's shorter life expectancy (if they smoke, are overweight or have other health problems).
However, the numbers sold varied greatly between people who bought their annuity from the company they built up their pension (known as an internal annuity) compared to those who has bought one from another company (external annuity).
Some 59% of external annuities were enhanced, compared to just 8% of internal annuities.
Tom McPhail, head of pensions research at Hargreaves Lansdown, said: "It is not surprising to see annuity sales plummet in the wake of the budget announcement. We know from our own research that many investors are treading water to see what their options are before committing to a retirement income strategy. Interestingly we also know that over 90% of investors do value a guaranteed income in retirement, so perhaps many of them will still end up buying an annuity."
He added: "We are becoming increasingly concerned about the volume of short-term retirement deferrals which is building up and the potential tidal wave of activity which could ensue around April next year. Investors could end up facing administration delays if some pension providers struggle to cope with demand. Anyone who is interested to use the new drawdown rules might want to consider acting sooner rather than later as they can use drawdown now and still keep their options open for next year."
The Office for National Statistics has also reported that 45% of men and 49% of women below retirement age in Great Britain did not have a private pension between 2010 and 2012. Among those aged 50 and State Pension Age, these figures fell but only slightly to 35% and 39% respectively.