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Daily Insurance Industry News
Sunday 18th of November 2018
September 27, 2011

ABI bans annuity “roll over” forms

by Gill Montia

Story link: ABI bans annuity “roll over” forms

The UK’s annuity market has received a wake up call from the Association of British Insurers (ABI), which wants more pre-retirees to shop around before investing their pension pots.

The Association is about to introduce a compulsory code of practice for insurers, requiring them to remove the annuity application forms that accompany the packs sent out to pension customers in the run up to retirement.

With no form to hand, confused or lazy consumers should be less tempted to “roll over” pension savings into an annuity with their current pension provider.

Under the new code, customers should also receive all the information they need for hassle-free shopping around for an annuity, with the ABI saying it will continue to work on this with Government, consumer groups, and others.

Latest ABI figures show the proportion of consumers currently shopping around at 70%, with 46% of consumers already discarding their pension provider’s annuity rates and opting for better deal.

However, around a third of retirees are potentially missing out on higher income that could amount to thousands of pounds over the course of their retirement.

Mark Hoban, MP and Financial Secretary to the Treasury, has welcomed the ABI’s announcement, saying it forms an important part of a package of measures aimed at encouraging consumers to tackle the annuity market and improve their retirement prospects.

With about 650,000 people in the UK turning 65 each year, providers shouldn’t have to wait long to assess the impact of excluding roll over application forms from their pre-retirement packs.

Unfortunately, not all the news on annuities is good for consumers.

Yesterday, actuaries, Alexander Forbes, reported that in the past six month, the average British private sector worker saving in a defined contribution pension scheme lost a further £1,300 per annum of their future retirement income.

This is partly as a result of falls in the bond yields that undergird annuity rates and with global finances in a precarious state, worse could lie ahead.

 

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