By Daniel Hunter
People approaching retirement will receive much greater support to get the best possible retirement income under a compulsory Code of Conduct launched today (Monday) by the Association of British Insurers (ABI).
ABI figures show that a third of people do not shop around for an annuity when they reach retirement and, as a result, may be missing out on a higher income, potentially losing thousands of pounds over the course of their retirement.
In addition, many customers who could qualify for an enhanced annuity, due to medical conditions or lifestyle choices, buy a conventional annuity, which may mean they miss out on a higher income during retirement.
The ABI’s Code of Conduct will ensure customers have access to information to enable them to make an informed decision about annuities appropriate to their needs and lifestyle in retirement. The Code continues the work of the ABI to improve customer engagement and contribute to the financial education of customers.
The Code of Conduct will require the ABI’s members to:
- Provide clear and consistent communications to ensure customers are able to make informed and proactive decisions about retirement income products, and are able to shop around for the most appropriate product.
- Prominently highlight enhanced annuities, and the much higher income they can potentially offer, and inform customers whether they offer these products, and how to find out who does.
- Clearly signpost customers to advice and support, both from regulated advisers and government-backed advice organisations.
- Establish transparency in the annuity market so that customers have a clear picture of how individual providers’ product offerings fit in with the wider market.
The ABI’s compulsory Code of Conduct comes in force today (Monday) and will be implemented by members by 1 March 2013. The ABI and its members will continue to develop the detail of the transparency commitment to ensure comparisons can be made accurately and fairly, with a deadline for implementation by 1 March 2013.
“These changes are a big step forward for customers at retirement and were informed by extensive consultation and consumer research," Otto Thoresen, Director General, ABI said.
"Improved processes, better signposting and transparency will combine to make customers more confident and more able to make decisions about their retirement income. This is not the end of our work helping customers to get the best deal at retirement; we will continue to work with key stakeholders including Government and the advisory community to improve the customer experience.”
Mark Hoban, MP and Financial Secretary to the Treasury said he welcomed the ABI's announcement.
"I want to help people approaching retirement to get the best possible deal when buying an annuity," he said.
"That's why 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. The announcement today, as an outcome of the work of the OMO Review Group is an impressive example of industry, consumer groups and Government working together with the ABI to deliver a package of measures that will help consumers.”
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