The ABI is to publish its members' annuity rates online every two months to help consumers see the difference shopping around can make to their retirement income. Jenna Towler reports…
Buying a lifetime annuity is one of the biggest financial decisions a client will make in their lifetime, setting their annual retirement income for the rest of their life.
Earlier this year the market came under criticism for being opaque and hard to navigate, in response the Association of British Insurers (ABI) came up with its compulsory Code of Conduct on Retirement Choices. Launched in March, the code first of all focused on communication and the sales process.
This week, its next flank – a compulsory survey which will detail each provider’s rates every two months to be published on the ABI’s website - was put out to consultation.
Yvonne Braun, the ABI’s head of savings and retirement, explained: “We will survey all of our members every two months with different customer profiles, the profiles will vary from survey to survey. We will then put the results on our website. You will be able to see what a notional male, 50-year-old, with type 1 diabetes for example would get from all the different providers.
“Potentially that will be very powerful, as it will bring home to people what difference it makes if you are ill, but also how their individual providers fit in with the wider picture.”
The ABI said the number of people switching from their pension provider to a different annuity provider was “edging up” after a drive to encourage shopping around at retirement.
Getting the product right
Braun also said it was essential people end up with the correct type of product when they retire.
“We think it is incredibly important the people end up with the right type of product. We know that there are quite a lot of people who should get an enhanced annuity but end up with just a conventional annuity.
“If you have advice the figures for people getting an enhanced annuity are much, much higher. Clearly there is an imbalance there and we want to make sure everybody can benefit [if they qualify for an enhanced annuity].”
She also said a lot of married people end up with a single life annuity when they do not fully understand their spouse will be left with no income.
“We think it is really important from a consumer detriment point of view that people understand incredibly clearly what the product does. The code is trying to establish that. The more information that is out there, the better it will be it. It will also help people to understand the value of advice.”
The ABI conduct requires its members to:
• Provide clear consistent communications to help customers make informed decisions about retirement income products.
• Highlight the different types of retirement income, particularly enhanced annuities and the much higher income they can potentially offer.
• Clearly signpost customers to sources of advice, both regulated advisers and government-backed organisations such as The Pensions Advisory Service and the Money Advice Service.
• Establish transparency in the annuity market so that it is more accessible and easy to understand.
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