More than 300,000 retired people have seen their private pension income cut by around a third because of the Bank of England's quantitative easing programme.
Dr Ros Altmann, director general of Saga, said the government's attempts to control the economy by printing money has left many pensioners with a financial nightmare.
"The Bank of England has suggested that rising asset prices have offset falls in annuity values so that pension incomes are unaffected. But this not the case. For those with income drawdown, the impact has left many facing a catastrophic fall in pension."
She said some 325,000 people with capped income drawdown plans have suffered from the negative impact of QE on gilt yields as well as being adversely affected by government rule changes. Those in poorer health have been particularly penalised, as no special provision is made within the new rules for their shorter life expectancy.
"These people have done the right thing by saving for their retirement, but are being forbidden from spending their own money. Those who are less healthy and less wealthy are being particularly penalised."
Income drawdown has been popular with pension savers who chose the option over the risk of being stuck in a low-paying annuity with no prospect of future capital growth. Industry experts estimate there is around £20bn invested in these funds.