Aegon gauges insurance ignorance

While 70.3 per cent of respondents said they had or would normally consider buying contents insurance, only 1.8 per cent said they would consider insuring their retirement income.

But when asked if they would look at a product that guaranteed their retirement income was paid for life, never fell and could rise over time, 49 per cent of those yet to retire replied they would.

The research indicates that while there is an appetite for insuring pension income, there is a lack of understanding and knowledge of unit-linked guarantees, according to Aegon.

The product only came over from the US in 2006 and has come under fire from some quarters for carrying higher charges.

At a seminar organised by Aegon to discuss the increasing relevance and importance of unit-linked guarantees, Colin Bell, product director for unit-linked guarantees of Aegon said: "Yes, there is an additional guarantee charge. The returns will be less than if you have invested in pure drawdown but that is essentially an insurance premium."

He said that with defined contribution schemes becoming the standard retirement vehicle – putting more onus on self-provision - unit-linked guarantees will become an important market for the future, providing an alternative to annuities and income drawdown.

Mr Bell said: "For an affordable cost, unit-linked guarantees can provide people with the security of knowing their retirement income will never run out, never decrease and also has the potential to increase over time if the underlying investment performs well."

Laith Khalaf, pensions analyst for Hargreaves Lansdown, said that while unit-linked guarantees were a great concept, the products that have been delivered to the market have been too dear.

He said: "The guarantee has come at too high cost."

Mr Khalaf said he sees annuities remaining the way most people decumulate their pension.