Policy holders who are “throwing away” guaranteed annuity rates are to be offered an “uplift in the value of their pension pot” as an alternative.

The initiative, led by Royal London, would offer policy holders with a guaranteed rate an actuarially fair exchange in return for surrendering the guarantee, the firm said feedback had been overwhelmingly positive, with five in six looking to proceed.

The Financial Conduct Authority estimated that over half of savers are discarding their guaranteed rate, in favour of choosing to access their pension funds without taking an annuity.

The rate almost tripled since pension freedoms were introduced, typically one in five before freedoms, compared to three in five post freedoms, Royal London said.

Royal London director of policy, Steve Webb, said: “Having a guaranteed annuity rate attached to a policy is a very valuable benefit, and that is why we have become increasingly concerned that growing numbers of policy holders are throwing away that guarantee so that they can access their pension pot instead of buying an annuity.

“We are therefore testing the appetite of policy holders to see if they would like to be given the option of an uplift in the value of their pension pot as an alternative to their guaranteed annuity rate.”

According to Royal London, 30,000 of its customers purchased Scottish Life pension products which guaranteed them an annuity rate at retirement, regardless of market rates.

Webb said that those who wished to retain guarantees will be free to do so, and that Royal London will continue to work closely with the regulators to ensure members are given a fair deal.

The initiative will now be considered at a high court hearing on 25 June 2018.