Editorial: Here's the choice you wanted

The latest would-be soothsayer was consultancy PwC, which estimated the annuity market could reduce by three-quarters – if the 1,200 people it surveyed are a fair representation of wider opinion.

This provided some symmetry with the 1,000 defined contribution members surveyed by scheme advisers Hymans Robertson, where only one in four said they would buy an annuity.

But what will the others do with the funds? One in eight said they would take cash, and the rest would take a combination of cash and annuities, annuity-like products and drawdown.

One company hoping to benefit from the change and the perilous choice now faced by those approaching retirement is insurer MetLife, as a provider of products that seek a middle way between the uncertainty of drawdown and the crushing finality of the annuity decision.

Illustration by Ben Jennings

What in the US are called variable annuities, and in the UK are sometimes called third-way annuities, are products that offer some kind of lifelong income or capital guarantee while allowing the opportunity for further uplifts to these underpins from good investment performance.

“What we would like is that more people enter this space,” MetLife’s sales director Dave Ewens told me. Whatever the threat to its market share, it is unsurprising that the provider wants more of the ‘would-have-annuitised’ population funnelled into this corner of the market.

But I find myself agreeing with Dave here. Yes, there should be due scrutiny of the costs of these guarantees, what is lost in security versus an annuity and what is lost in flexibility versus drawdown, but the appetite for security should trigger products than can compete on value.

Our front page today demonstrates a company’s rare decision to take some defined contribution investment downside risk off the table. The debate on the price of guarantees is not going away.

Ian Smith is editor of Pensions Expert. You can follow him on Twitter @iankmsmith and the team @pensions_expert.