Annuity Direct has warned the Association of British of Insurers' (ABI) code of conduct on annuity purchase will not be ‘strong enough' to protect consumers or encourage shopping around.
The firm's chairman Alan Higham [pictured] believes the code, which officially launches tomorrow, will be seen as flawed by the Financial Conduct Authority who will be conducting a thematic review on the annuity market.
He said the regulator will take issue with the way annuities have been sold in the past. For instance, investment linked annuities sold without advice that assume unrealistic rates of investment returns. As a result, he believes retrospective business reviews will be forced upon members.
Higham also said the ABI's code will send "superfluous, confusing and unhelpful information to consumers "
He warned the ABI's decision to publish sample rates will leave advisers having to explain to customers that such rates don't exist and undermine trust in advisers. Other annuitants will turn to their current provider as first point of help amid confusion.
Higham said there should be a new ‘blue print' for achieving good outcomes in retirement income.
"Give consumers a one page letter identifying the size of their fund; explain they have to make a decision what to do with it; explain that a good/bad decision could be worth £X to them and all the information they need is enclosed," he says.
"The ABI should collaborate with specialist retirement advisers and the Society of Later Life Advisers who want to see a directory of accredited advisers to ensure the people that consumers are referred to can be relied upon (within the bounds of reasonable human frailty). There are thousands of people who could meet a reasonable minimum standard and provide the link that consumers need."
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