Life companies have rejected claims they are unfairly profiting from fewer people taking up guaranteed annuity rates.
Contrary to claims by Just Retirement, a number of major players have stated that customers with Gars are made fully aware of the value of their guaranteed rates.
Those who do decide not to take advantage of these guaranteed rates understand what they are giving up, these providers claim, adding that rules dictate those with balances of more than £30,000 must seek professional advice.
They have also rejected calls for providers to pay out a lump sum based on the value of the Gar rather than the accumulated lump sum, much like a defined benefit transfer.
Standard Life accepted that, while "a number of customers continue to exercise their Gar", the number was dwindling as a result of pension freedoms.
However, a spokesperson for the company insisted it communicated the value of a guaranteed annuity rate to those who chose to cash out.
"To ensure that our customers with a guaranteed annuity rate are informed when making decisions about their retirement income, we make them aware that their guarantee represents a valuable benefit and that they will lose this right if they don’t exercise it."
A spokesperson for Aviva said the company "made explicitly clear to customers whose policy includes a Gar that one exists".
"A discussion on the subject of Gar, the value attached to it and the cost of not exercising it are also part of our call scripts and discussions with customers who either reach selected pension age or proactively ask for information about their options," the spokesperson said.
A spokesperson for Prudential said, while customers with less than £30,000 did not have to take advice, the firm does "cover risk warnings on the phone with the customer before we will proceed".
"This may also include issuing the customer with an options pack prior to them making their decision," the spokesperson said.
Since pension freedoms took away the requirement to buy an annuity, figures from the Financial Conduct Authority reveal 68 per cent are declining to take a guaranteed annuity rate up.
That figure is even greater for people with balances of £30,000 or less (79 per cent) and more still for balances of £10,000 (90 per cent).
That is despite the fact that the average guaranteed annuity rate offers far better value than annuities today - between 9 per cent and 12 per cent, according to Just Retirement.
Last week, specialist annuity provider Just Retirement claimed that life companies were unfairly profiting from the trend of savers failing to opt for the guaranteed annuity rate.
The firm's communications director Stephen Lowe added that, for those savers who needed to take advantage of pension freedoms, the secondary annuity market would have allowed them to receive the full value of their Gar.
Last month the government announced it was scrapping plans to allow people to cash in their annuity
Unlike Standard Life, Aviva reported the majority of customers with a Gar continued to take it up.
Aviva flatly rejected calls for life companies to pay out defined benefit transfer-style lump sums to those who did not want their Gar.
"The option is to take an annuity and not a guaranteed transfer value. The contract was priced and concluded on the basis that the option provides a guaranteed lifetime annuity," the spokesperson said.
Aviva also rejected the claim that the secondary annuity market would have solved this problem.
"The sale of an annuity would have resulted in a considerable write-down of its value thus annulling much of the extra value attached to the Gar the first instance," the spokesperson said.
"In effect, the main beneficiary would have been the buyer of the annuity rather than the annuitant (the seller) themselves."
Paul Gibson, managing director of Granite Financial Planning, agreed with Just Retirement that the way providers communicate the value of Gars "isn't great".
He said Gars were currently offering around twice as much as annuities on the open market, but this fact was easily lost on customers, particularly on those not receiving financial advice.
"Giving up a Gar is often the worst thing you can do, but for the average client it's difficult to compare A with B."
He said it would help if the customer was provided with a clear comparison of what they would receive if they converted their Gar, and what they would receive on the open market.
However, he stopped short of calling for transfer value analyses for all customers looking to cash out, saying it would be too expensive to do this.
He also said it wouldn't be fair to force life companies to pay out lump sums based on the value of the annuity, rather than the actual lump sum accumulated.
"It is a contract and if the insurer is honouring their side of it, then it is not really fair to make them pay more," he said.
james.fernyhough@ft.com
