Consumer appetite for a guaranteed retirement product is on the up, according to research by AEGON.

The insurance giant claims to have found that 49 per cent of people would consider the idea of taking up a variable annuity or 'third way' product.

These 'alternatives to annuities' are supposed to provide retirees with both a stable, and flexible income. Introduced to the UK from the US market in 2006, they pay an income which, AEGON said, can rise over time due to links with the stock market - they also give consumers the peace of mind of a guaranteed income for life.

Speaking at a briefing focused on unit-linked guarantees on 18 November, head of pensions development at AEGON, Rachel Vahey, said that the way people were making financial decisions was changing and that "the concept of a fixed retirement" was fading.
Her colleague, Colin Bell, product director of unit-linked guarantees at AEGON, defended the high cost of 'third way' products, saying that consumers were paying for a guarantee charge.

"This is essentially an insurance idea," he said. "Is that worth one per cent? I would argue that it is."

He said there are also concerns that unit-linked guarantees are tainted by the US, but quashed this because the UK has a very different regulatory environment to the US.

Bell concluded that it is down to a lack of understanding across the market and consumers, although "providers are doing more to educate the market". He added: "We need to do more to educate consumers on the benefits of insurance - the protection against the most financially damaging events or serious inconvenience. Retirement income is fundamental to providing a good standard of living in later life. For an affordable cost, unit-linked guarantees can provide people with the security of knowing their retirement income will never run out, never decrease and also has the potential to increase over time if the underlying investment performs well."

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