Retiring in a low annuity rate environment

Annuity rates are at their lowest levels ever. In June 2012 the yield on our benchmark gilt (15 year gilt yield as quoted in FT) fell the lowest levels since records started in 1703 and currently stands at 2.09%. Over the past year our benchmark annuity (Male age 65, Female 60, £100,000 purchase, joint life 2/3rds, guaranteed five years and level payments) has fallen by over 8%, and over the past three months it has fallen by 3%. To make matters worse annuity rates could fall even lower as the Sword of Damocles in the guise of Solvency II and gender neutral annuity pricing still hangs...