Retirees who have converted their superannuation savings to account-based pensions are having an anxious time.

Projections they made during the bull market about how long those pensions would last and how much income they could draw from them each year have had to be revised in the face of last year's market collapse and, for many, the updated numbers are not good.

Account-based pensions are the most popular option with retirees who convert their super to an income stream and don't take a lump sum.

Once called "allocated pensions", these give retirees plenty of investment options, the ability to vary the income level and access to their capital at any time.

The fact these pensions exposed retirees to market risk did not worry anyone too much but that has changed.

Now the superannuation industry is looking at a range of new super and pension product options that maintain exposure to growth assets but provide some protection from market risk.

Consumers can expect to see notices from their super funds and pension providers about products that offer a degree of market protection.

In North America and Europe, where such products have been in the market for several years, they are known as variable or hybrid annuities.

The idea of these products is that the super fund member or pensioner can have money invested in a diversified portfolio of shares, property, fixed income and cash and pay an "insurance" premium that will protect the capital value.

In pension form these products guarantee a fixed level of income even if the underlying account balance runs out.

AXA Australia was the first to market such a product locally in November last year, when it launched a superannuation and pension platform called North.

North allows a fund member to guarantee the value of the asset for an annual fee that ranges from 0.7 per cent for a portfolio with a defensive strategy to 2.45 per cent for a high-growth strategy.

Fund members take out protection for terms ranging from five to 20 years. North also offers a ratchet clause that allows members to lock in annual gains in the value of their account balances.

The head of structured solutions at AXA Australia, Andrew Barnett, says attempts to provide this type of protection in the past have relied on a form of hedging that moves the members' funds from growth to defensive assets in response to changing market conditions.

The problem with that type of protection was it did not remove all the market risk and it changed the asset allocation of the fund.

AXA uses hedging instruments such as interest rate swaps, currency funds and equity futures.

"We invest in assets that have an inverse relationship in price to our guarantee exposure," Barnett says. "The fund member can stay fully invested in their chosen strategy."

North has attracted about $240 million since its launch. Barnett says things were slow after the launch but over the past few months applications have jumped from 50 to 100 a month and he expects to see competitors launch similar products.

"It is inevitable," he says. "There is a need for it. The bulk of our super savings are in accumulation funds that are exposed to market risk. The investment environment was benign for a long time but not any more."

The chief executive of ING Australia, Harry Stout, who came from ING in the US to head the local business, says guaranteed income options have become commonplace in the US.

He has set up a team to develop guarantee options for the local superannuation and pension market.

The head of the Australian risk management practice at the consulting firm Milliman, Wade Matterson, says the impetus for the development of new retirement income products came not only from heightened market risk; he says an equally pressing issue is the longevity risk - that people will outlive their retirement savings.

"People going into retirement don't understand how much life expectancy has changed," Matterson says. "One in three men retiring at age 65 today will live to age 90. Women are living three years longer on average."

The only way to get a retirement income guarantee for life at the moment is to buy an insurance product called a lifetime annuity.

These have been unpopular products because they pay low rates of return and leave no capital for estate planning.

Matterson says the hybrid annuities being developed overseas attempt to combine the flexibility and potential for high returns of account-based pensions with the certainty of lifetime annuities.

A pension product with a guaranteed minimum income level comes with the additional cost of about 1 per cent a year for the guarantee.

The trend towards hybrid annuities has met with some scepticism. The principal of Rice Warner Actuaries, Michael Rice, says the cost of protection, plus administration and asset management, make for an expensive product.

"[It] could cost 3 per cent or more a year," he says.

"If the security of the asset is paramount, why not go into a term deposit and roll it over each year?"

The managing director for Australia of consulting group Watson Wyatt, Andrew Boal, says retirees have to keep in mind that the age pension provides them with a buffer if their pension's assets fall in value.

Under the asset and income test, a retired couple would be eligible for at least a part pension with assets of up to $849,500 and income of up to a combined $65,000 a year.

"You might be in an account-based pension and lose a substantial amount of income as markets fall but an increased age pension contribution would mitigate quite a bit of that loss," he says.

However, Boal believes some innovation in the retirement income market would be welcome.

"It would be good to see variable or hybrid annuity products that provide some protection without being too expensive," he says.