The ABI has today launched a consultation on annuity rates transparency to help people approaching retirement get the best pension deal.
The consultation follows the publication, in March this year, of the ABI Code of Conduct on Retirement Choices, which requires ABI members to provide clear and consistent communications to their customers in the run-up to their retirement.
As part of the Code, the ABI will be publishing a range of annuity rates available to help customers understand how the products of individual providers fit into the wider annuity market. This will include both the rates of providers competing for customers on the open market and those of providers offering annuities only to their existing pension customers. To make sure we get this right we are launching this consultation on our proposals and welcome feedback from a wide range of stakeholders and insurance companies.
Stephen Gay, the ABI’s Director of Life, Savings and Protection said:
“ABI members are committed to making it easier for consumers to shop around for the best annuity deal as they approach retirement. For the first time we will be publishing rates of companies who only offer rates to existing customers as well as companies competing on the open market. Buying an annuity is one of the most important financial decisions people make and shopping around for the right one can make a significant difference to people’s retirement income.
“Making the market more transparent is a further step in helping people with this decision. We want to get this right so are launching a consultation on our plans and welcome feedback from a wide range of stakeholders and insurance companies,"
Steve Webb MP, Minster for Pensions, said:
“This move by the ABI to improve the transparency of annuity rates is a step in the right direction. Pensions need to be simple and clear so that people can engage with them.
“I am determined to ensure that every pound put aside is turned into the maximum amount of pension.”
Philip Brown, LV= Head of Retirement Propositions comments:
"LV= fully supports this proposal from the ABI. One of the most important decisions people make is about how they structure their income in retirement and we have already seen a rise in the number of people shopping around to get the highest annuity rate possible. We believe that making annuity rates public will make it easier for more people to shop around and make an informed decision. This can only help people select the product which best suits their needs."
Andrew Tully, pensions technical director, MGM Advantage commented:
"This consultation signals a move by the ABI and its members to be more open and transparent around the annuity market and should be welcomed. It will force providers who currently don't compete for business in the open market to publish annuity rates which will then easily show where customers are getting good value from their pensions. The challenge though will be to encourage customers to take the next step, to not only compare rates, but consider the most suitable product for their individual circumstances.
"Our research shows up to 70% of customers can qualify for enhanced terms on their annuity rate due to medical or lifestyle conditions, and yet in the non-advised market only around 2% of customers currently buy an enhanced annuity. So we still have much work to do."
NAPF Chief Executive Joanne Segars said:
“We have been calling for greater transparency around annuities for some time, so we are pleased to see that the ABI has launched this consultation.
“It is crucial that consumers get clear information and can make simple comparisons on what is available on the market. Currently, consumers are dealing with an unfair and opaque system, which is preventing too many from securing a good retirement income.
“The ABI’s proposals are a first step in the right direction. But we believe that more can be done to help members to shop around for the best annuity, including making advice and support services part of the scheme itself so that there is a true ‘default’ Open Market Option in place.
“We look forward to responding to the consultation.”
ABI’s proposal in brief:
We propose to conduct a regular survey of all ABI members offering annuities, setting out a number of typical customer profiles and asking what income each of these would receive from an annuity.
This information will then be published and made available to consumers via the ABI website, along with other information about the providers, such as whether they are offering guaranteed annuity rates, and whether they refer pension customers to an annuity provider or a panel of annuity providers.
The consultation will run until Monday 3 December. To participate please visit www.abi.org.uk
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