The Association of British Insurers (ABI) has today launched its code of conduct on annuity purchase, designed to help savers approaching retirement secure the best possible rates and understand their retirement choices.

The code, due to be implemented on 1 March, will improve customers’ confidence by explaining different ways to take a retirement income including providing for dependants, lifestyle or medical conditions that may mean they are eligible for an enhanced annuity.

In addition, insurers will no longer include annuity application forms as part of their advice so there will be less chance for a customer to take an annuity from their current provider without having first shopped around. Furthermore, the ABI said that 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 customer will again be informed of their various retirement options.

ABI director general Otto Thoresen said: “Increasing life expectancy means that many people will be receiving a pension for longer than they were paying mortgage so the need to make the right decisions at retirement has never been more important.

“The timely, clear and relevant information provided under the code will significantly increase the number of people reaching retirement with the confidence to make the right decision.”

The National Association of Pension Funds (NAPF) welcomed the code of conduct on annuity purchase, but stated that there is also room for further development. NAPF director of policy Darren Philp stated that the code “should reduce the risks of people sticking with their original pension provider for an annuity, when instead they could get a much better deal elsewhere”.

He added: “The ABI’s work is welcome, and an important step forward, but we believe that there is further to go if we are to maximise the chances of people securing the best possible retirement income. Many people approaching retirement will need more active help to get them shopping around for the best possible annuity deal. That could be through appointing an annuity advisor or broker to help them, and embedding that process as part of the pension scheme itself.”

PICA management board member and Just Retirement group external affairs director Stephen Lowe argued that “there are around 2.5 million customers in trust-based, occupational defined contribution pension schemes who are not protected by these changes” and therefore “The Pensions Regulator and the DWP must put in place the same standards to ensure these pension members are not provided with a second division service”.

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