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The Actuary The magazine of the Institute & Faculty of Actuaries

ABI annuity initiative is “nowhere near enough”

Under the ABI initiative, ABI members will remove the annuity application form in the communications they send to their customers, which will stop consumers from automatically rolling over their pension savings to an annuity with the current provider, making it easier for them to shop around to get the best possible retirement income.

However, insurers will still be able to include a quote for their own annuity, which may be significantly less than the best rate available on the market.

Director of life and savings at the ABI, Maggie Craig, said: The Association of British Insurers believes all consumers should shop around to maximise the income from their pension savings.

However, Tom McPhail, head of pensions research at the company, and chairman of the Pension Income Choice Association, said the ABI's annuity initiative doesn't go anywhere near far enough towards ensuring good outcomes for retiring pension investors.

Mr McPhail said: "What the ABI is proposing is a fudge rather than the fundamental reform which is needed to encourage more people to shop around for their annuity. Consumers only get the chance to buy annuity once, after which they are locked in; the pensions industry should be taking all possible steps to ensure they are getting the best deal available."

Hargreaves Lansdown is calling for a more far reaching reform to ensure pre-retirement communications lead to more retiring investors shopping around for the best rate, and a rate which is appropriate for them and takes into account their health and lifestyle.

Commenting on the initiative, Mark Hoban, MP and financial secretary to the Treasury said (pictured): "I welcome the ABI's announcement on how they are going to help people shop around for an annuity which will ensure people get the most out of their retirement fund. The ABI's announcement can form an important part of a wider package of measures to encourage consumers to get the best from the annuity market, which the Government is working with the pensions industry, advisers and consumer groups to deliver in the coming months."