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ABI releases blueprint for drawdown comparison tool

24/04/2018

The Association of British Insurers (ABI) has today outlined the steps required to create a drawdown comparison tool. To bring the tool to fruition, the ABI believes joint action is required from the pensions industry and the FCA, whilst responsibility for making the tool available should sit with the new Single Financial Guidance Body (SFGB).

A key component of the tool is the need for some form of standardised presentation of costs and charges data. This will require an agreement about the appropriate assumptions or scenarios that could be used to enable a simple, but meaningful comparison of products - boosting transparency and maximising consumers’ ability to pick the most suitable alternative.

While advisers already make recommendations based on a comparison, non-advised customers will find it harder to compare products themselves, either before or while they are in drawdown.

Another key element of the proposals is the development of ‘consumer profiles’, based on risk and retirement strategies, that will provide relatable scenarios for customers to align themselves with to make a more personalised decision about the retirement journey.

The ABI has recommended that the following 8 projects must be completed in order to enable the SFGB to create the tool:

  • Project 1: Consider how the tool should fit within the broader guidance journey, which would be the responsibility of the SFGB.
  • Project 2: Agree how data on costs and charges could be standardised and presented. This should be agreed between the FCA and the industry.
  • Project 3:  Reach consensus on whether and how to establish risk profile/capacity for loss. This project could sit with the FCA.
  • Project 4: Use existing calculators to help compile consumer profiles. Oversight of this project could be given to the SFGB.
  • Project 5: Reach consensus on the best ratings to compare customer service and features, or develop a new one if existing ones are not sufficient. This would require a collaboration between the SFGB and the industry.
  • Project 6: Agree governance and data standards for the site. This would require a collaboration between the SFGB and the industry.
  • Project 7: Create accessible information on drawdown products, their benefits and risks, responsibility of which may best sit with the SFGB.
  • Project 8: Undertake consumer testing and finalise interface design to reflect behavioural economics research around effective consumer usage of websites. The ABI recommends that this is owned by the SFGB.

Key challenges for delivering the tool include striking the right balance between simplicity and proving enough information, and ensuring that the tool doesn’t stray into providing financial advice. The tool should also point customers towards other retirement products, or where they could access financial advice, should their circumstances suggest that these might be beneficial.

Rob Yuille, Head of Retirement Policy at the ABI, commented:

Rob Yuille“The pension freedoms have thrown up a vast set of new retirement options, and consumers need more help to understand their options and compare between them. This is not just a one-off decision, but needs to be based on their overall goals for retirement.

“A Drawdown Comparison Tool will be an useful mechanism for ensuring that consumers have the resources to choose the right option for them based on their needs, not just price. Our blueprint, released today, charts a clear path to bringing the tool into reality.” 

 

 

-ENDS-

Last updated 24/04/2018