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People to be encouraged to shop for annuities

People to be encouraged to shop for annuities

Category: Annuities

Updated: 20/01/2012
First Published: 20/12/2011

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

People are to be given more encouragement to shop around for an annuity to suit them, under new rules.

The Association of British Insurers (ABI) has launched a consultation to find out 'what more the industry can do to help people make good choices when they retire'.

The ABI says that under the current system, people are missing out on thousands of pounds through their retirement.

Under the code, members must remove the annuity application from communications to customers so that they cannot simply roll their pension over.

However, the ABI is looking to take the initiative further and is consulting on a draft of a new code of conduct that would see all communication with customers include a standard statement on the first page about the benefits of shopping around.

Under the proposals:

  • All communication with customers must include a standard statement on the first page about the benefits of shopping around
  • Illustrations of possible annuities given by the provider which have not been asked for by the customer must follow strict rules to ensure options are comparable and include a very clear statement about the benefits of enhanced annuities due to medical conditions even if the provider does not offer the product
  • Providers' sales processes must take customers through the key questions they should consider when buying an annuity.

"We have worked very hard with our member firms to encourage more people to shop around at retirement, but there are still too many people who choose not to," said Maggie Craig, director of life and savings at the ABI.

"They could be missing out on thousands of pounds of retirement income as a result. We want to do everything we can to help people get a good income in retirement which is why we are asking for views on the code we plan to introduce.

"Since 2009 the number of people buying an annuity from a different provider has increased from 36% to 44% which is encouraging, but there are still a third of people who choose not to shop around."

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