Pension annuities should be clearer under new code
A new code of conduct is being launched by the Association of British Insurers (ABI) which should ensure that the sale of annuities is fairer and more transparent.
The new code is designed to make it easier for people to make decisions about their retirement income, including being more confident in using the so-called ‘open market option’ and shop around for the best deal.
A recent report by the National Association of Pension Funds (NAPF) suggested that many people do not realise they are allowed to shop around for an annuity.
Many retirees simply accept the pension offered by the company that has managed their money up to retirement, which is often not the best option.
With the value of annuities falling significantly in recent years, it is vital that people compare the deals on offer, and the code should ensure that people approaching retirement are given the guidance they need to do so.
It is estimated that the way annuities are currently sold is costing half a million retirees each year as much as £1bn in future pension income.
The ABI’s new code requires its member to provide clear advice on
how to shop around for an annuity.
It also requires members to ensure that people are aware of enhanced annuities, which provide a higher pension income to people a shorter life expectancy.
The new guidelines must be implemented by March next year.
Meanwhile there is growing concern that thousands of workers have been wrongly advised to opt out of final salary company pension schemes.
Speaking to The Telegraph, the Financial Services Authority said: “As things stand, there is a high risk that members receive unsuitable advice.”
It is believed that up to 100,000 workers have been offered pension opt-out in the last three years.
The Telegraph suggests that this could potentially cause a £20bn pension mis-selling scandal.