Members of the Association of British Insurers will extend their annuity cancellation periods until at least 17 April or contact retiree customers to confirm whether they want to continue with the purchase of their chosen product.
This follows guidance from HM Revenue and Customs and the Financial Conduct Authority outlining how firms should handle the changes to the retirement income sector brought into play by chancellor George Osborne in this year’s Budget.
HMRC yesterday (9 April) confirmed that there would be no tax penalties for people who decided not to go ahead with an annuity purchase within a cooling-off period.
Huw Evans, director of ABI policy and deputy director general, said: “ABI members also aim to restore cancelling customers to their pre-decision position as far as possible; and where it is not possible for the original pension provider to achieve this, the new provider and the original provider aim to find a solution so that the customer can benefit from the Budget changes.”
Partnership, an ABI member, confirmed it will extend its cooling-off period for customers to decide if they want to buy an annuity.
Partnership also yesterday sent a note to shareholders alongside its annual results warning of a ‘short term’ hit to annuities sales resulting from Mr Osborne’s changes. However, it added that the government promise of guidance for retirees would help make up for the sales shortfall by increasing the number of people who shop around before buying an annuity.
Although not an ABI member, Aegon also confirmed the 30-day cooling off period, within which it can restore customers to the financial position they were in before buying an annuity. Aegon will also be contacting customers who opted for the open market option since 18 March, making them aware of the Budget changes and prompting them to contact their annuity provider.
It added in a statement that it will accept back customers’ open market options.
This morning the FCA warned that advisers and providers both must ensure they tell clients of the potential for offered rates to fall or the dangers of ignoring guaranteed rates if they forego annuities before April 2015, and said it was concerned over a potential anti-annuity bias.
As well, the regulator said it will be monitoring changes to firms’ business models and new product developments following on from the Budget so it can step in if it sees any risks to consumers emerging.
Andrew Megson, managing director of retirement at Partnership, said: “The chancellor unveiled a series of changes in the budget that will have an impact on people’s choices at retirement. We believe that it is vital for people who are currently annuitising to have the opportunity to review what this means for them and then discuss this with their adviser before making their final decision.”