The withdrawal of a number of high profile firms from the guaranteed drawdown market is indicative of a conceptual problem with the product, as well as the costs of creating it, according to Alastair Black.
Speaking at the Money Marketing in Focus conference in London today, Black said that the number of products to serve decumulation clients was not a significant issue in the market, and that guaranteed drawdown was not a silver bullet for retirement planning.
Also known as unit-linked guarantees, guaranteed drawdown combines the benefits of pension drawdown – where a client remains fully invested in the market – and an annuity, which provides a guaranteed level of income until death.
Hailed as a potential answer to the pension freedom challenge back in 2015, a number of providers have now withdrawn from the guaranteed drawdown market citing low take-up.
These include Metlife, Aegon and Axa – with Royal London and Old Mutual also stalling on their offerings.
The plans have been criticised for being too expensive for the benefits they provide, though research conducted by the Lang Cat last year found that over 25 years guaranteed drawdown generated higher income than drawdown and other “third-way” products.
Rather than innovation, some commentators believe helping consumers to fully understand existing choices is of primary concern, as “information overload” proves a significant problem in the pension market.
Also speaking at the event, Just head of sales technical Michael Lines said that standardisation of the tools used to look at drawdown products was essential.
He said: “Studies show that while financial and numeracy skills peak at 65, they begin to dip around 75, leaving people potentially vulnerable. A universal metric to compare different drawdown products is needed.”