The Association of British Insurers' (ABI) code of conduct marks an important milestone for annuity customers, according to pension experts.
The reforms will introduce a climate of transparency and education to ensure customers shop around for the most appropriate annuity instead of being shoe-horned to their pension provider's offering.
Providers are now required to:
- prompt consumers to shop around - including gathering competitive quotations from other providers.
- begin customer communications earlier - up to five years before their normal retirement date.
- ensure customers understand the retirement journey and signpost them to information and advice
- highlight the role of alternatives such as enhanced annuities, even if they do not offer the product themeselves
- send out wake-up and follow-up packs that contain a shopping around guide and do not include an application form for that provider unless requested by the customer.
ABI head of savings and retirement, Yvonne Braun said the code is "a real step change. I hope it will lead to a much better outcome for consumers and ensure they can get as much as possible out of their pension savings."
Mark Hoban, MP and financial secretary to the Treasury said: "I welcome the ABI's new Code of Conduct which, together with the impartial support offered by the Money Advice Service and the Pensions Advisory Service, will help those approaching retirement get the most out of their savings fund."
He praised the outcome as an example of cooperation between industry, government and consumer groups.
However, some industry commentators believe more will need to be done down the line.
Steve Lowe, external affairs and customer insight director of Just Retirement and a member of the Pension Income Choice Association said: "I am incredibly positive. It is four steps forward but what it isn't is, job done.
"This code relates to ABI members and therefore there's a big part of the market that isn't covered by the code. "
He added: "We won't see the implementation for a year [the deadline is 1 March 2013] and then it will probably take a year to see the outcomes, so potentially we've still got a long time before we see the true impacts if some providers drag their feet in implementing it."
Braun said "Is a one year implementation period reasonable? It's going to be really tough because of the other changes taking place such as auto-enrolment and RDR. Consumer bodies said it should be shorter, our members said it should be longer so we figured we're probably in the right place putting it at a year. Ultimately we want to see real change on the ground."
Industry Voice: Scottish Widows pension expert Robert Cochran and economist Andrew Scott discuss the future of employment and income, in episode three of Scottish Widows' podcast series.
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