In the first year of pension freedoms - from April 2015 to May 2016 - the firm monitored more than 11,000 users of its online adviser tool, finding 33 per cent had opted for a guaranteed income.
But of that third, just 1.98 per cent opted for guaranteed drawdown products - that is, those with the full flexibility of drawdown, but with an added guaranteed income feature - with the remaining 98.02 per cent opting for traditional annuities.
Drilling down further, Selectapension found by far the most popular guaranteed drawdown provider was MetLife, accounting for 53 per cent of sales.
According to Selectapension’s data, Metlife’s nearest competitor is Aegon, which accounted for 23 per cent of sales.
No other provider came close to these two for guaranteed drawdown sales.
Both MetLife and Aegon launched hybrid products last year in response to pension freedoms, with Selectapension’s national account director Peter Bradshaw suggesting their newness went some way to explaining the slow uptake.
“It is early days, but clearly they have a long way to go to catch up with annuities. It is a bit of an education job I suppose.”
Mr Bradshaw said advisers and their clients may also be cautious due to the more complicated nature of the product, in comparison with an annuity.
MetLife did not disclose how many investors had taken up its guaranteed drawdown product since it was launched last autumn, but the firm’s wealth management director Simon Massey told FTAdviser there had been “significant growth”.
He also mentioned that “thousands” of advisers had already signed up to the product.
Aegon, which launched a similar product last summer, was more subdued, saying sales of its guaranteed drawdown product had been “slow”.
However, regulatory strategy director Steve Cameron said the firm was confident the product would pick up, thanks to “latent consumer demand” for products that mixed flexibility and a guaranteed income.
Both products have features of annuities and drawdowns products, designed to protect retirees from what Mr Massey said were the two major risks of drawdown: longevity risk and ongoing sequencing risk.
As with a drawdown product, they allow asset growth and flexibility, but also provide an annuity-style guaranteed income for life, worth an annual income of around 4 per cent of the initial value of the pot.
In the case of MetLife’s product, that means on an initial investment of £250,000 individuals would be guaranteed to receive an income of £10,000 a year, regardless of what happens in markets.
Despite this annuity-like guarantee, Mr Massey said MetLife’s product was “definitely not an annuity”.
Christopher Foster, a financial adviser with Pennines IFA, said he was not convinced that the existing products on the market provided good value.
“I tend to find they are expensive. When you unpick them, you find there are better ways of getting a guaranteed income,” he said.
He added that the providers offering guaranteed drawdown are “selling a product rather than providing a solution”.
james.fernyhough@ft.com
