The Association of British Insurers (ABI) has announced a new code of conduct which its members must adopt by March 2013.
Retirement experts have been concerned for some time about the way in which Annuities are sold and particularly by the relatively low numbers of retirees who are shopping around for the best Annuity rate.
A recent report by the National Association of Pension Funds (NAPF) described the current system as “unfair and opaque”.
The NAPF report stated that the way Annuities were being sold had cost half a million retirees around £1 billion with the main concern being that retirees are not shopping around for the best Annuity rates.
Code of conduct for Annuities
The new ABI code of conduct will ensure its members will provide:
- Clear and concise information including details on how to shop around for the best Annuity rate
- Highlight Enhanced Annuities, which provide a higher income for people who suffer from ill health or have lifestyle issues, such as smoking, which could affect their life expectancy
- Point retirees to the external advice and support that is available
- Explain how their product fits into the Annuity market as a whole
The ABI will insist members implement the new code of conduct by March 2013, although they may adopt it sooner if they wish.
Otto Thoresen, ABI Director General, said: “These changes are a big step forward for customers at retirement and were informed by extensive consultation and consumer research. Improved processes, better signposting and transparency will combine to make customers more confident and more able to make decisions about their retirement income.”
Thoresen continued: “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.”
Open Market Option
The code of conduct is aimed at increasing the numbers of retirees who exercise their Open Market Option (OMO) and shop around for the best Annuity rate.
The OMO is offered by all pensions, with the exception of Final Salary or Defined Benefit schemes.
Using the Open Market Option and consulting an online pension Annuity calculator will easily show just how much extra income can be secured by shopping around for the best Annuity rate.
Taking advice from an Independent Financial Adviser can also offer significant additional advantages as the IFA can suggest other retirement income options, which may be more suitable, search the market for the best Annuity rate and advise whether an Enhanced Annuity can be secured.
Annuity application forms
The code of conduct will also mean that insurers will not be able to include Annuity application forms in the packs sent to retirees confirming their final pension pot and Annuity options; it is hoped that this will dissuade people from simply taking the first Annuity they are offered from their existing pension provider.
Our team of Independent Financial Advisers in Nottingham are experienced in developing retirement income strategies for clients the length and breadth of the UK. If you are approaching retirement and would like advice on our options call one of our IFAs today on 0115 933 8433, alternatively enquire online or email firstname.lastname@example.org