Annuities and other guaranteed income options remain the most popular product for people with small defined contribution pots, despite the scrapping of compulsory annuitisation, a report has found.
The survey of 52,000 people, conducted by fintech firm EValue, found 41 per cent of those with pension savings of less than £50,000 would use the money to buy a guaranteed income product.
But it was with the slimmest of margins - one percentage point - that annuities came out on top among this group.
Forty per cent of those with small pots favoured flexible drawdown options, an option that was not available for low-balance retirees before the introduction of pension freedoms in April 2015.
Twenty per cent, meanwhile, favoured withdrawing a cash lump sum.
The research found the larger the pot size, the more likely the individual was to favour flexible drawdown.
Bruce Moss, founder and strategy director of EValue, said the "strong correlation" between the preference for flexible income and increasing pension wealth seemed "very rational".
"The additional costs associated with flexible income are easier to justify, the risk of variations in the level of the income which is sustainable for life may be easier to shoulder and there is a stronger sense of ownership as pension assets increase," he said.
"However, part of the effect is also due to the fact that men tend to have higher pension funds and are more favourably inclined to flexible income."
Of those with pot sizes between £50,000 and £100,000, 52 per cent favoured flexible drawdown, 35 per cent guaranteed income, and 13 per cent cash.
For the next band - £100,000 to £150,000 - the gap had widened, 55 per cent choosing flexible drawdown, 34 per cent annuities, and 11 per cent cash.
Of those with more than £150,000 in a DC pension, 66 per cent opted for flexible drawdown, 26 per cent opted for guaranteed income products, and just 8 per cent opted for cash.
Evalue's research came a day after the Association of British Insurers released its own figures on the behaviour of retirees post-pension freedoms.
It found the number of full cash lump sums had remained high in the second year of the pension freedoms policy, with £1.627bn taken in full cash withdrawals in the second and third quarters of 2016 combined.
The ABI figures also confounded assumptions that annuities were dying. In Q2 of 2016, £1.18bn was invested in 20,800 annuity policies, while in Q3 £1.17bn invested in 20,100 annuity policies.
That was similar to levels seen in the first year of pension freedoms.
james.fernyhough@ft.com
