Annuity providers are improving their approach following the ABI code on retirement choices, which could lead to less shopping around, according to Legal & General.
Tim Gosden, head of strategy for individual annuity business at the insurer, told Money Management in a video interview that “providers are going on the front foot” with their pensions customers.
“I really think that customers, over time – and this will take time – are going to get a much better outcome,” he said.
“Maybe you’ll see less customers shopping around as a result of all this activity. That’s not necessarily a bad thing, it’s the customers with the smaller pots who need the help, who need the contact, who need that conversation.”
The code requires ABI members to proactively contact those approaching retirement encouraging shopping around with information on their options and potential eligibility for an enhanced annuity. It also prevents providers sending default tick-box forms for direct purchase of their own annuities.
Mr Gosden added that we are likely to see more customers contacting providers for advice about their pension annuity.
“Providing they’re getting a good outcome from their provider, the difference in shopping around anyway might not be that significant,” he said.
A developing trend in this area is the increase in providers offering an enhanced annuity alongside their conventional option. In MM’s recent annuities survey, Scottish Widows indicated its intention to enter the enhanced annuity market. In addition, L&G told MM that it plans to make a push into this area.
The insurer estimates that only 35 per cent of individuals could be classified as ‘healthy’ when they reach retirement. L&G is currently testing the inclusion of a medical questionnaire in its pre-retirement packs to ascertain its impact on the take-up of enhanced annuities.