Legislative changes that bring obvious benefits often also carry hidden dangers.

While the new freedoms being offered to pensioners mean another blow to the annuity market, the fact that the vast majority of retirees will now choose income drawdown, is going to create challenges for advisers and their clients.

Although it's almost inevitable that some people will use the free access to their pension pots, available after April, to strip out their funds early, the vast majority will be concerned to try to maintain the level of income that they need, without eroding their fund values too quickly.

In later life, the two things people value most are certainty and flexibility. Until recently, when approaching retirement, they had to choose a retirement income product that offered either one or the other. In a nutshell, annuities guaranteed an income for life but no flexibility, whereas drawdown offered flexibility but with a risk to capital if markets fell or too much income was taken.

While reconciling these two apparently contradictory aims appears impossible, the development of guaranteed drawdown, which aims to combine the plus points of annuities and income drawdown, while eradicating their respective pitfalls, may just have squared the circle.

Very simply (and there isn't enough space in this blog to go into too much detail), guaranteed drawdown takes the security of an annuity and combines it with the flexibility offered by income drawdown. This offers both the certainty of a guaranteed income for life and the flexibility to adapt to future changes in financial circumstances.

It does so by providing a secured capital base, for all or part of an individual's retirement fund, to which market rises are locked in, but which will not go down if markets fall. This capital base in turn underpins a guaranteed income for life which cannot run out, however long the planholder lives.

This is going to be an interesting option for anyone over the age of 45, regardless of whether they have already started to take income drawdown, and particularly for those people who don't have a large appetite for risk.

Robin Sainty APFS M.A. (Cantab)