Aegon is to close its guaranteed drawdown business leaving a question mark over the role of the products in the current market.
A spokesman for Aegon told FTAdviser it had decided to pull the product after consulting its panel of advisers and detecting limited interest in it.
The firm has sold £1bn worth of guaranteed drawdown products since their launch three years ago, compared with an estimated current market value of £3bn to £4bn.
Secure Retirement Income (SRI) will close to new business on 1 March with new applications accepted until 28 February.
Existing customers will be unaffected by the changes
Aegon’s chief executive, Adrian Grace (pictured), said: "We will be closing the product down because there isn't a demand for it.
"If demand resurrects itself and people feel that they want more guarantees and interest rates start to rise to make it more economical, we will consider recreating them."
The SRI closure will be accompanied by the sale of Aegon's Irish subsidiary, Aegon Ireland, which offered the products, to AGER Bermuda Holding.
Aegon's departures from this market follows the likes of Axa and MetLife and comes just months after the regulator signalled it wanted to see more innovation around retirement income solutions for consumers.
The Financial Conduct Authority (FCA) flagged concerns around the level of innovation since the pension freedoms took effect in its retirement outcomes review interim paper last July, saying it wanted to see more products for the mass market that would combine flexibility with an element of guaranteed income.
But the problem with guaranteed drawdown is often the perceived high price.
Aegon's SRI comes with a 0.3 per cent product charge, a guarantee charge of 0.9 per cent and further optional charges of 0.5 per cent for guaranteed minimum death benefits and 0.5 per cent for joint life benefits.
"Add in adviser charges and it is perhaps double the cost of the [basic non-guaranteed collective] alternative," said Dave Penny, managing director of Invest Southwest.
He said: "With MetLife the charging was similar. The perception was poor value for money and perception is everything."
Chris Noon, partner at pension consultancy Hymans Robertson, agreed guaranteed drawdown was very expensive.
He said: "You end up in a product that is almost as expensive as an annuity with big restrictions on flexibility."
He doubted there would ever be an active market for the products precisely for that reason.
Mr Grace said it was about the equation of making sure there is value for the consumer, the adviser and the provider.
He said: "In a low interest rate environment it is very difficult to get that balance to work."
Despite this, Scottish Widows is rumoured to be preparing to enter the market with a similar type of product.
The firm's head of fund proposition, Iain McGowan, wrote on Scottish Widows' website in January it was exploring the development of a 'drawdown product aimed at the mass market, which would give clients the flexibility of drawdown as well as some form of guarantee', although adding it may not be classed as a 'hybrid product'.