Speaking at the launch event, the trade body’s director general claimed the code would “significantly increase the number of people reaching retirement with the confidence to make the right pension decision”.
The ABI code of conduct on retirement choices, which is mandatory for all members, will come into force on 1 March with measures to promote positive retirement options and shopping around.
It will require member firms to provide “clear, timely information” for people approaching retirement by encouraging the customer to consider their options two years before retirement. It will be followed by further communications six months and six weeks before retirement to give details options such as combining small pots.
Insurers will no longer be able to provide ‘inertia’ communications by sending an application form to a customer.
Firms must explain the different options for retirement income and ask a series of questions to promote careful consideration of retirement choices. Providers will have to provide personalised illustrations before customers can purchase an annuity.
The ABI plans to monitor communications to assess the effectiveness of the code. It has also proposed that all members should publish their annuity rates.
Stephen Lowe, group external affairs and consumer insight director for Just Retirement, said the code was the “biggest reform that we have ever seen” in the at retirement market. He added: “The customer should be protected from defaulting into poor products”.
Alan Higham, chairman of Isle of Wight-based Annuity Direct, said the code would not be far-reaching enough to protect the consumer. He said: “I think the code will be seen as flawed and, as a result, reforms will be forced upon members which could include a past business review.
“I think the information that consumers will be sent under the code is superfluous, confusing and unhelpful. I suspect it will also drive more consumers to transact with their current provider.
“The ABI should collaborate with specialist retirement advisers and the Society of Later Life Advisers, which want to see a directory of accredited advisers to ensure the people that consumers are referred to can be relied upon, within the bounds of reasonable human frailty.”
