People about to retire are getting insufficient support from employers in choosing their annuity, the National Association of Pension Funds has warned.
The NAPF today issued a report on the advice and brokerage market used by private sector employers who offer defined contribution pensions. It said savers retire with poorer annuities than they could have got if support to 'shop around' the annuity market been included in their pension arrangements.
But employers that offer defined contribution pensions are only required to provide basic information on this.
The NAPF said there should be more support for employers and trustees to help staff with decisions around annuities and income drawdown.
Problems highlighted by the NAPF in disseminating information on buying annuities included employers being too scared to go beyond the legal minimum in helping staff at retirement because they fear legal comeback, something the NAPF said was often based on misconceptions
Smaller employers were also reluctant to meet the cost of setting up guidance and advice services, while those people with smaller pension pots were less profitable for advisers and brokers.
The report noted that the advice and brokerage market can be complex for employers to understand.
Mel Duffield, NAPF head of research and strategic policy, said: 'As [people] approach retirement what they really need from their employers is more support and advice. But at the moment there are market barriers that stop that happening more widely.
'People should automatically shop around for the best annuity when they retire, and employers and pension trustees can do more to make this happen. While insurers are getting better at communicating with savers, it is still the case that hundreds of thousands are failing to obtain quotes and compare prices in the market.'
Duffield said decisions around securing a retirement income were 'baffling' and savers needed independent help to make sensible choices.
The NAPF will launch a Made Simple Guide for trustees and employers later this year. It will also enhance its training and development for trustees and employers running defined contribution pension schemes.
Commenting on the NAPF's findings, Tom McPhail, chair of the Pensions Income Choice Association, said: 'Now the government has decided to set minimum standards for auto-enrolment pension schemes, it is essential that it sets out in the current Pensions Bill suitable standards to help members shop around for a retirement income.
'A good starting point would be for all auto-enrolment schemes to match the ABI Code of Conduct in terms of guiding members towards a suitable type of annuity and to shop around at least 80% of the annuity provider market to source a good annuity rate for their members. There is no reason why the government can't do this right now.'
