Royal London clients with guaranteed annuity rates will be offered a cash swap deal if a High Court hearing gives the provider the go-ahead.
The provider said post-pension freedom many people were shunning valuable guaranteed annuity rates in order to access their pension pots.
It said Financial Conduct Authority figures showed more than half of savers with guaranteed annuity rates attached to their pension pots are “throwing them away” in retirement by accessing their pension funds without taking an annuity, or guaranteed income for life.
Royal London said it wanted to stop about 30,000 clients with Scottish Life policies losing out. It is heading to the High Court for approval of its plans on 25 June.
If the scheme is approved, policyholders with guaranteed annuity rates would be offered an actuarially fair exchange (based on the usual pattern of individual taking a tax-free lump sum) in return for surrendering the guarantee.
The provider added people would be free to opt out and retain the guarantee and existing terms if they wanted. However, it said the cash uplift would give them more options at retirement.
Royal London said it would provide free guidance for all those affected and would heavily subsidise personalised financial advice for people who need more personalised help.
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 policyholders are throwing away that guarantee so that they can access their pension pot instead of buying an annuity.
“We are already seeing that significant numbers of policyholders are interested in this option. We will continue to work closely with regulators and others throughout this whole process to ensure that members are given a fair deal.”