Over the years the ABI has religiously, and zealously, protected members’ interests, often to the detriment of consumers, and it has been more inward than outward looking. Indeed to be appointed its director general (numero uno) has been akin to being given a poisoned chalice and sometimes it has all got too much for the incumbent lieutenant.
I shall never forget Kerrie Kelly three years ago suddenly packing her bags and running back to the hills of Australia after just six months in the ABI hot seat. Indeed I was at an insurance conference on the very day she quit and where she was due to deliver the after-dinner speech. An ABI stand-in, Nick Starling, was forced to read out the speech he had dutifully written for her. Although personal reasons were given for her abrupt departure, there were whispers that the ABI’s board were not particularly impressed with her lack of focus and felt she was not delivering.
Yet times are a changing. Under the new leadership of the ‘Viking warrior’ Otto Thoresen, the ABI has begun to remodel itself. Slowly but surely, it is really attempting to live up to some of its consumer-focused aims: the promotion of best practice, transparency and high standards within the industry.
Nowhere has Mr Thoresen worked more tirelessly than in the at retirement space where for far too long too many pension suppliers (insurance companies) have failed to deliver best practice, failed to maintain high standards and failed to be transparent with customers.
This has resulted in a majority of customers being pushed by insurers into retirement income options not fit for purpose and which ignore key personal circumstances and health issues. The open market option has remained a secret to most pensioners while the value of advice has been brushed aside. Insurance companies’ financial interests have come first, customers’ best retirement income options a dim and distant second.
Mr Thoresen, thankfully, has set about changing all this. In March this year the ABI launched its retirement choices code, an initiative aimed at ensuring most people were given sufficient information by their pension providers to make informed retirement income choices.
It means customers are no longer unceremoniously bullied into buying a poor value (and often inappropriate) annuity from the manager of their retirement fund. Instead they are now encouraged, well ahead of retirement, to shop around and consider other key issues such as buying an annuity that provides not only for themselves but for dependents as well.
Although it is still too early to judge whether this retirement code is leading to better retirement outcomes, the world is a better place for it.
The retirement choices code has now been improved with the launch of the ‘annuity window’. Pensioners can go online at www.abi.org.uk/annuities and see for themselves the value of shopping around for an annuity and the wide disparity in annuity rates offered by individual providers. Example annuity rates from insurers are given and the window also allows pensioners to see what happens to their income when dependents, health issues and location (postcode) are factored in.
It is well worth a butcher’s. On first impression it seems Reliance Mutual (a somewhat unknown quantity) is a kindly annuity provider, on both single life and joint life, while Scottish Widows/Clerical Medical and Halifax (all part of the Lloyds Banking Group) are meanies. On enhanced annuities, MGM Advantage are the good guys while Friends Life are the bad boys.
Of course the ‘annuity window’ is far from perfect. Some annuity suppliers are notable by their absence, the data is not real time and the rates given are only specimen rates for a limited range of scenarios. There is also a fear that the window could be manipulated by providers to further their own best interests. So a sharp provider could make their annuities look really attractive in the window in the hope of generating lots of new business but then, when it comes to the crunch, actually offer inferior rates. The ABI said it will police the window to ensure it is not abused in this way. Such policing needs to be vigilant.
My biggest issue with the window is that until insurance companies provide details of its existence in the pre-retirement packs they send out to customers, it will remain something of an unknown tool (pensioners are hardly going to visit the ABI website on their own volition). Unfortunately it is going to take a while for insurers to do this.
It is also disappointing that a list of annuity/retirement specialists has not been made available on the window, as previously promised. As we all know, good financial advice is critical ahead of retirement.
Yet it is better that the retirement choices code exists, and it is better that we have a window on the annuity world. With the FCA set to publish the results of its own inquiry into annuities next year, we are at last moving in the right direction.
Jeff Prestridge is personal finance editor of the Mail on Sunday
philthomas9 in response to the adviser Chris Hann saying RDR had been a disaster (Insistence on upfront fees is a ‘disaster’, claims Hann, FA 29 August)
How refreshing to hear from an honest adviser. I hope his business prospers, it certainly deserves to. Unlike the majority of respondents who believe that they can continue to rip-off investors with their typical 3 per cent to 7 per cent upfront fees and 1 per cent a year – the industry is a disgrace.
