Two providers are considering introducing a form of default strategy for drawdown savers to make it easier for them to safeguard their assets from market falls.
The strategies are based on the idea of limiting withdrawals to natural income - the income that is produced by the assets invested - thereby avoiding sequencing risk when markets go down.
Sequencing risk means more money is lost when markets are down in the early years of a drawdown plan than if the same happens in the later years - given money is being drawn from the fund at a higher rate than the fund's natural income.
Markets have been on an upward trajectory since the pension freedoms were implemented in April 2015, which gave many savers access to income drawdown for the first time, but there were the first signs of a correction in early February.
Both Hargreaves Lansdown and self-invested personal pension (Sipp) provider AJ Bell said they wanted to create a plan that was simpler to manage for investors with little investment experience.
Tom McPhail, head of policy at Hargreaves Lansdown, said: "We are aware there has been continued policy interest in the [aftermath] of pension freedom and in particular drawdown and whether [people] are taking fairly informed decisions about the long-term implication of their capital and their income.
"Having a whole series of risk warnings in place, tax risk, longevity risk, investment risk, we are thinking should we create a simpler pathway for people who want to go into drawdown."
He said the firm's concern was it had seen a number of people come up with ideas about investment strategy in drawdown but "it is only part of the strategy, we need to marry those up with income strategy."
Tom Selby, senior analyst at AJ Bell, said: "The idea is quite straightforward. At the moment our customers can go into drawdown through a Sipp and manage their withdrawals themselves.
"What we are considering is whether you could have a drawdown product with a set withdrawal rate.
"One thing you could potentially do is have a drawdown account where you can only take out the dividends your underlying investments produce.
"So, say your investments produce 5 per cent and you have a £100,000 pot, then the product would limit your withdrawals to £5,000 in that year."
Both firms emphasised they were at the early stages of testing their ideas and may yet scrap their plan for limiting drawdown.
They also said they would never default their clients into such a strategy and any pathway created would be accompanied by substantial communications efforts.
There would also likely be a control procedure put in place for those wishing to go over their natural yield limit.
This could take the form of a questionnaire and risk warnings, Mr McPhail said.
He said: "We won't stop people but there is a responsibility on us to make sure they are feeling informed as they step beyond that income default strategy."
Mr Selby added: "Clearly if you were going to do something like that you would need to have a process in place for someone who decided they wanted to take out more than £5,000 for whatever reason.
"We haven't even decided on the product yet, so certainly haven't decided what that process might be. But the important thing is nobody would be forced into this account, it would just be an option."
The Financial Conduct Authority (FCA) signalled it was considering a return to default retirement income strategies in its Retirement Outcomes Review interim report out last July.
Mary Starks, director of competition at the FCA, said the watchdog wanted feedback on whether there needs to be a new form of default option for savers struggling to make sure their pension pots last them a lifetime.
She said at the time: "It is an unbelievably complex decision for someone at retirement. They have a pot of money and say they are 65 they might be expected to live for the best part of another 30 years but frankly, who knows?
"They are not going to know what their needs are going to be over that time. They don't know how active they are going to be. They don't know what the stock markets are going to do. They don't know what interest rates are going to do.
"For that reason we absolutely have to consider some form of default strategy being available to people.
"It is going to have to be an option that we take very seriously."
In its discussion paper on non-workplace pensions out on 2 February, the FCA said it was concerned about value for money in default options for non-workplace pension savers.
The watchdog stated it was concerned informal defaults may be operating in the market that are not subject to the same protection as defaults in workplace pensions, where independent governance committees were introduced to oversee the ongoing value for investors.
carmen.reichman@ft.com
