Aviva’s Managing Director of At Retirement, Clive Bolton, said:
Aviva strongly supports the direction the ABI is taking in addressing the issues affecting how people take their retirement income.
Aviva has been actively campaigning for change in the retirement market for some time, particularly around annuities, as outlined in our Five Point Plan* and it’s good to see the ABI taking action.
Having a conversation with customers about their retirement options and providing clear information in the lead up to retirement is essential if we’re to help people make the most of their savings. This is something Aviva has been doing for some time. Ensuring every provider obtains medical information, as Aviva does, will immediately benefit consumers and we need to ensure we do this in a consistent way across the industry.
On small pots, we agree that people who have limited pension savings should have more flexibility about how they access their money, and a £10,000 limit is a good starting point. It’s essential we now work together to agree a solution that balances flexibility for those with limited savings with the overall goal of getting people to save for a reasonable income in retirement.
Aviva's Five Point Plan for a better retirement:
1. Consumers must be given clear guidance to help them understand the choices available, the importance of their decision and how to compare rates, BEFORE choosing their provider.
The number of customers shopping around is increasing but there are still far too many who through inertia, lack of understanding or not knowing how or where to get information and advice, stay with the company they have saved with for the wrong reasons. All too often these customers are offered poor value annuity rates.
2. Providers MUST obtain medical information and ensure customers understand the potential benefits this can have on increasing their income.
A single, consistent medical questionnaire should be mandatory and used by all providers and distributors to support a common approach to underwriting.
Providers currently not offering this should make it absolutely clear to customers that, as a consequence, there may be a severe reduction in retirement income.
3. Competitive annuity rates for existing and open market customers.
The practice by some providers of exploiting customers' loyalty and inertia by offering their existing pension savers poor value, uncompetitive annuities when they reach retirement needs to stop. Every customer should have confidence that they will be offered a fit for purpose product, which offers good value whether they stay with their existing provider or shop around. Aviva will always strongly encourage its pension customers to shop around first.
4. The limitations of 'restricted' panels should be made clear to customers.
Providers or distributors who use 'restricted' panels of annuity providers should make it absolutely clear that they are not offering a 'whole of market' service in which all providers are considered. In doing so, they must be upfront in explaining the limitations of this approach - specifically the potentially severe reduction in retirement income.
5. Customers should take care shopping around for an adviser.
Some companies like Aviva take great care to bring all available options to a customer’s attention - including alternatives to annuities like 'drawdown' products for those customers with larger pension pots. However, ideally customers should obtain independent advice. Customers should be particularly wary of some execution-only websites that receive hefty commissions or charge excessive fees for doing little more than providing quotations.
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