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ABI launches consultation to encourage more people to shop around for a decent retirement income

Many people are still missing out on a better retirement income by not shopping around when they cash in their pension for an annuity. The Association of British Insurers is launching a consultation to find out what more the industry can do to help people make good choices when they retire.  

The ABI announced in September that it would introduce a compulsory code, binding all its members, to actively encourage people to shop around.  Under the code ABI members will remove the annuity application form from all communication they send to their customers which means customers will not simply be able to roll their pension over into an annuity with the same provider.  

Today's consultation asks for views on this draft code of conduct which will go further than simply removing the application form:

  • 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.      
Maggie Craig, Director of Life and Savings, ABI said:

"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. 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. We want to make sure our proposals will really make a difference so we will also research what will have an impact on customer behaviour to help people make good choices."  

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

The ABI is also very interested in hearing views on whether providers' illustrations of possible annuity options have an impact on customer behaviour and plans to undertake consumer research to gather evidence on whether the code will have the desired effect of more people shopping around.

Last updated 01/07/2016