The Association of British Insurers says that many people are missing out on better retirement income by failing to shop around when they cash in their pension for an annuity.

The Association of British Insurers is launching a consultation to find out what more the industry can do to help people make good choices when they retire.

The ABI announced in September that it would introduce a compulsory code, binding all its members, to actively encourage people to shop around.  Under the code ABI members will remove the annuity application form from all communication they send to their customers which means customers will not simply be able to roll their pension over into an annuity with the same provider.

Today’s consultation asks for views on this draft code of conduct which will go further than simply removing the application form:

·         All communication with customers must include a standard statement on the first page about the benefits of shopping around

·         Illustrations of possible annuities given by the provider which have not been asked for by the customer must follow strict rules to ensure options are comparable and include a very clear statement about the benefits of enhanced annuities due to medical conditions even if the provider does not offer the product

·         Providers’ sales processes must take customers through the key questions they should consider when buying an annuity.

Maggie Craig, director of Life and Savings at the ABI said: “We want to do everything we can to help people get a good income in retirement which is why we are asking for views on the code we plan to introduce.”

Since 2009 the number of people buying an annuity from a different provider has increased from 36 per cent to 44 per cent which, says the ABI, but a third of people choose not to shop around.

The ABI is also very interested in hearing views on whether providers’ illustrations of possible annuity options have an impact on customer behaviour and plans to undertake consumer research.

Tom McPhail, chairman of The Pensions Income Choice Association (PICA) and head of pensions at Hargreaves Lansdown, has welcomed the proposed Code of Conduct from the ABI.

He said that the Code will serve to: simplify the retirement experience, emphasise the importance of shopping around, highlight the significance of enhanced rates for those who are eligible and ensure that all investors are led through in interactive process prior to personalised quotations being issued. He added that there remains considerable work to be done and while the Code will undoubtedly bring significant progress for pension investors "we have also identified additional reforms which we believe could further improve investor outcomes."

Fidelity gave its support to the ABI’s draft Code of Conduct in relation to Consumers in the Retirement Income Market but expressed disappointment that the draft code is not tighter in terms of the provision of unsolicited illustrations to customers.

To download the ABI consultation paper click here: http://www.abi.org.uk/Publications/60176.pdf