Initiative will stop “automatic” annuity rollover

People approaching retirement will find it easier to shop around to get the best possible retirement income under a new initiative launched today by The Association of British Insurers (ABI). The ABI has announced it will introduce a compulsory code of practice for insurers. Under the new code, ABI members will remove the annuity application form in the communications they send to their customers. This will stop consumers from automatically rolling over their pension savings to an annuity with their current provider

The new code will also ensure that customers receive all the information they need to shop around in one easily accessible place. The ABI will also continue to work with Government, consumer groups, and others, to make it easier to shop around.

ABI figures show that increasing numbers of consumers are buying an annuity from a provider which is not their pension provider (46% in 2011, compared to 35% in 2008), and about 70% of people shop around, that is, consider switching provider.

However, about a third of people do not shop around. As a result, consumers may be missing out on a higher income, potentially losing thousands of pounds, over the course of their retirement. Given about 650,000 people turn 65 in the UK every year (i), it is critical that the industry supports those individuals to obtain the best possible retirement income.

The ABI has identified customer inertia as one of the key reasons why people fail to shop around. Most consumers receive an application form for an annuity from their existing provider as part of the communication pack posted to them in the run-up to their retirement date. Many simply complete and sign the application form and send it back to their existing provider, rather than shop around for a better deal.

Maggie Craig, Director of Life and Savings said:

“The Association of British Insurers believes all consumers should shop around to maximise the income from their pension savings. However, not enough people shop around currently. This new industry initiative has been developed to make a significant difference to people’s retirement outcomes.”

Mark Hoban, MP and Financial Secretary to the Treasury said:

“I welcome the ABI’s announcement on how they are going to help people shop around for an annuity which will ensure that people get the most out of their retirement fund. The ABI’s announcement can form an important part of a wider package of measures to encourage consumers to get the best from the annuity market, which the Government is working with the pensions industry, advisers, and consumer groups to deliver in the coming months. “


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Notes

Notes for Editors

1. Enquiries to:
Liz Forster 020 7216 7444 (Mobile: 07717 578 586)
Malcolm Tarling 020 7216 7410 (Mobile: 07776 147 667)
Linsey White 020 7216 7415 (Mobile: 07885 998 011)

2. Under this initiative the ABI will, in conjunction with members, develop a compulsory code of practice which will enact the change. This code will be introduced in the first quarter 2012.

3. The ABI is the voice of the UK’s insurance, investment and long-term savings industry. It has over 300 members, which together account for around 90% of premiums in the UK domestic market.
The ABI’s role is to:
- Be the voice of the UK insurance industry, leading debate and speaking up for insurers.
- Represent the UK insurance industry to government, regulators and policy makers in the UK, EU and internationally, driving effective public policy and regulation.
- Advocate high standards of customer service within the industry and provide useful information to the public about insurance.
- Promote the benefits of insurance to the government, regulators, policy makers and the public.

The UK insurance industry is the third largest in the world and the largest in Europe. It is a vital part of the UK economy, managing investments amounting to 24% of the UK’s net worth and contributing the fourth highest corporation tax of any sector. Employing over 275,000 people in the UK alone, the insurance industry is also one of this country’s major exporters, with a fifth of its net premium income coming from overseas business.
Insurance and businesses protect themselves against the everyday risks they face, enabling people to own their own homes, travel overseas, provide for a financially secure future and run businesses. Insurance underpins a healthy and prosperous society, enabling businesses and individuals to thrive, safe in the knowledge that problems can be handled and risks carefully managed. Every day, our members pay out £155 million in benefits to pensioners and long-term savers as well as £58 million in general insurance claims.

4. An ISDN line is available for broadcasts.

5. More news and information from the ABI is available on our web site, www.abi.org.uk.