The boss of the pension industry trade body has spoken out to agree with regulators that financial firms need to do more to help retirement savers.
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In a personal blog, Otto Thoresen, chief executive of the Association of British Insurers (ABI) highlighted three challenges that face the industry in the face of criticism from the Financial Conduct Authority (FCA).
And he urged the industry to take ‘immediate steps’ to help savers achieve a better retirement income.
Asking the right annuity questions
The three points he made were:
- Savers with small investment funds need more choice of annuity providers as fewer firms operate in the lower end of the market
- Annuity providers need to do more to help savers find the best value for money annuity, even if that means diverting them to another provider.
Thoresen pointed out that while 90% of retirement savers know they can shop around for an annuity, only two thirds bother checking out deals from different providers and less than half actually go on to buy an annuity from a firm other than their pension provider
- The industry needs to smooth out unequal access to enhanced annuities based on health and other lifestyle factors
“The ABI believes everyone is asking the wrong questions,” wrote Thoresen. “The key issue for small pot savers is whether they should buy an annuity, not where they should make the purchase.”
Thoresen also offered advice to annuity shoppers.
“Shopping around may not make a big difference to income. Often the difference is just a pound or so a week. But annuities are not just about finding the best rate, but choosing the right time to buy for the best value for money deal and buying the right product.
“The industry needs to act now to help those buying annuities gain the best outcome.”
Industry ready for action
Thoresen also revealed the financials services industry is ready to act on improving the annuity market before the FCA decides to act on completion of a market review in 12 months’ time.
Before the summer of 2015, he says the industry will:
- Make sure everyone who needs to buy an annuity talks their options over with their provider and receives impartial advice that suits their personal financial circumstances
- Providers will offer comparative annuity income figures from different providers so customers can clearly see the differences between different products
- Make sure customers with health or lifestyle issues that can affect the value of their annuity are pointed towards products that are suitable for them
“I believe these changes will make a big difference to everyone and we are determined to make them happen,” he said.
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