From the 1st March, people approaching retirement will get clearer help and information to get the best possible pension deal, under an initiative by the Association of British Insurers.
The ABI Code of Conduct on Retirement Choices will help the 400,000 people who buy an annuity each year, better understand their options at retirement, choose the right annuity for their circumstances and shop around for the best deal, through clear and consistent information provided by insurers.
While most people approaching retirement are aware of their options, one in four people feel they do not fully understand their retirement options, with one in three not feeling informed enough to compare quotes from another provider.
The Code is intended to improve customers’ confidence in getting the right pension by:
- Providing clear, timely information, to help people approaching retirement understand what their options are. At least two years from retirement the insurer will encourage the customer to consider their retirement options. Six months from retirement and at least six weeks from retirement, the insurer will send details explaining the various options, such as combining small pots, and shopping around for the best annuity.
- Explaining the different ways to take retirement income. This will include providing for dependants, lifestyle or medical conditions that may mean they are eligible for an enhanced annuity and protecting against inflation.
- Encouraging shopping around for the right pension deal. The benefits of shopping around among other providers will be clearly highlighted along with sources of further advice. Insurers will no longer include annuity application forms, so there will be less chance the customer will buy from the current provider without first shopping around.
To monitor the effectiveness of the Code, the ABI will conduct consumer research to assess changes in people’s retirement awareness and pension purchasing. The impact of the Code will be reviewed in 2014. As part of the industry’s commitment to greater pension’s transparency, the ABI will in the summer publish specimen annuity rates across a range of different products offered by members
Deciding how to structure income in retirement is one of the biggest financial decisions someone will make in their lifetime. With the shape of retirement changing and people enjoying a lengthier retirement, it is even more important that people make the most of their pension fund.
If you are considering purchasing an annuity and have any questions, feel free to contact us at Retirement and Investment Solutions.