Pensions  

Pica criticises ABI retirement code

The Association of British Insurers (ABI) code of conduct on retirement choices leaves room for providers to hope their customers remain inactive, according to the Pensions Income Choice Association (Pica).

Speaking at a seminar by the Tax Incentivised Savings Association (Tisa) yesterday on retirement income, Pica chairman Tom McPhail criticised the code, which is designed to encourage greater shopping around for annuities.

“I’m far from convinced that the code of conduct will make much difference, especially in terms of prompting consumers to leave their current provider,” he said.

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Mr McPhail criticised the way the process begins with a wake-up letter from providers, which leaves many customers staying with them out of perceived ease and comfort, although he acknowledged the constraints within which the ABI operates and later said they were not directly to blame.

“Turn the process on its head and turn it into an open-market, shopping around process,” he said. Without a reform of the whole system and process, he added, providers and bodies are “just tinkering at the margins”.

Speakers at the event said that more must be done to encourage shopping around, although questions were raised as to why the insurance industry is under such pressure to educate consumers.

Alan Higham, chairman of Annuity Direct, agreed that while the benefits of shopping around and changing provider were obvious to those in the industry, that knowledge has not trickled down to consumers.

“It’s not an obvious answer to Joe Public. Most people don’t even realise there’s a decision to be made,” he said.

Mr Higham said a shake-up of the process is unlikely to come from providers themselves. “You can’t expect insurance companies to do anything more than respect the rules of supply and demand,” he said, adding that the ABI has gone beyond the obligation on most industries to ensure customers are seeing as much of the market as possible. “That doesn’t happen anywhere else, so why should it happen in pensions?”