ABI sets new standard for pension provision

The director general of the trade body said it was imperative for the pensions industry to put in place a new minimum standard for customers, building on the work started by the Retirement Choices Code and acting on the challenges laid forth in the report from the FCA in its recent thematic review of annuities.

Mr Thoresen said: “It is critical to make sure savers have all the appropriate information they need easily to hand to make the best possible choice at retirement. This means changing the retirement process so that shopping around and providing medical information is built into it.”

Starting immediately, ABI members will implement the changes over the next 18 months, with completion targeted for summer 2015.

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The changes commit pension providers to facilitate a conversation for their customers about their retirement options, either with the provider themselves or an impartial advice service.

This conversation will include a high-level overview of alternatives to annuities as people approach retirement.

The ABI is also implementing a comparison of annuity quotes for customers, whereby all providers will offer a comparison – or an introduction to an intermediary who will deliver the comparison – early and prominently in the client’s retirement process. This comparison will be offered as an integral part of the process, not as an optional extra.

Ahead of the budget on 19 March, the pensions industry has also called on the chancellor to relax the rules surrounding small pension pots.

Currently, savers can only take their pot as cash if they have less than £2000 in it. ABI members would like savers with pots of £10,000 or less to be allowed more flexibility in terms of how they access their money, rather than being limited to buying a lifetime annuity.

Clive Bolton, managing director of at-retirement for Aviva, said: “Having a conversation with customers about their retirement options and providing clear information in the lead up to retirement is essential if we are to help people make the most of their savings.”

Key points

■ All customers must be offered the chance of a conversation with a provider or adviser.

■ The ABI will implement annuity quote comparison tools for customers.

■ Providers must monitor data on the proportion of customers who take up the offer of a conversation and comparison.

■ Providers must monitor how customers’ outcomes vary.

■ The government must simplify and relax the rules that state how much money people can take in cash when they come to retire with a small savings pot.

Adviser view

Neil Liversidge, managing director of West Yorkshire-based West Riding Personal Financial Solutions, said: “I’m not impressed by this. The way to get people to make better decisions on their annuity choices is to push them towards advisers. Members of the ABI need to show they want an active advisory community.”