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New at retirement rules for ABI members

Ian Naismith, 05 Apr 2013


 

New rules from the Association of British Insurers (ABI) should ensure that people nearing retirement will fully understand the options available to them.

The ABI implemented its Code of Conduct on Retirement Choices on 1 March 2013. The Code is compulsory for ABI members, but not for non-insured occupational schemes. It is designed to make certain that the 400,000 people reaching retirement each year do not simply accept the annuity offered by their existing provider.

Retirement communications will have to start at least two years before the planned pension date, 18 months earlier than the previously required letter, which must now include information about small pots and shopping around. Providers must highlight the availability of enhanced annuities, spouse’s pension and escalation. There is a strong focus on providing relevant information that consumers can easily understand.

Providers can no longer include an annuity application form with retirement quotations. Instead, consumers must request forms to apply for their pensions, and providers should verify that those who phone to request a form have considered the available options .

The ABI wants providers to be transparent about their annuity pricing so that consumers can compare different companies easily. Communications will also highlight where guidance is available, including The Pensions Advisory Service website and financial advisers. Providers will be expected to process claims quickly to the standards already set by the ABI’s Options Initiative.

The ABI plans to monitor the effectiveness of the Code, and the FSA has also launched a review of the operation of the open market option; the FCA will take over the review from 1 April 2013. It will look at pricing and particularly at any hotspots where consumers are more likely to suffer detriment, and then at firms’ retirement processes. The regulator may take further action if it believes that consumers are still not shopping around sufficiently.

It is widely agreed that the Code is a step in the right direction, and should lead more people to seek advice.

This article appeared in the March edition of Financial Timesaver - the monthly digital newsletter for the busy financial adviser. Click here to subscribe today.

 


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Ian Naismith

Actuary & Author

Ian Naismith is an actuary with over 30 years' experience of working in pensions for a major life office.  He writes and presents extensively, including an annual report on pension provision in the UK based on a large  consumer survey.  He is a Governor of the Pensions Policy Institute.    

Ian is also co-author of Pensions and Retirement Planning 2012/13, part of Taxbriefs Adviser Guides Series.

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