Pensions and Annuities Research:

06 August 2001: 
ABI launches statement of good practice for annuities - shopping around can boost retirement income
The Association of British Insurers (ABI) today launched a Statement of Good Practice recommending minimum standards for pension providers to apply when dealing with policyholders who are about to take their pension benefits.

One key element of the Statement is the requirement for companies to explain to consumers the availability of the “open market option”.

This will mean explaining to annuity consumers that they are entitled to buy an annuity from a different annuity company to the one which provided their pension. By shopping around, they may be able to buy an annuity which provides a higher income than their existing provider could.

The Statement also:

    * Recommends that annuity companies spell out the range of options available on retirement, including the different types of annuity products available.
    * Sets minimum standards for the timing and content of letters sent to policyholders whose pensions are nearing maturity.
    * Encourages the use of consistent terminology.

Commenting on today’s launch, Mary Francis, ABI’s Director General, said: "This Statement is another example of the insurance industry’s efforts to improve the quality and clarity of its communications with policyholders, and builds on the progress we are already making through initiatives like Raising Standards.

"For most policyholders, buying an annuity with the lump sum they have built up in a pension fund will be one of most important investments they will ever make. The Statement will make sure that policyholders have the information they need to make an informed choice about their annuity.”

Note

Compliance with the Statement is voluntary. However it is likely to become a benchmark of good industry practice. The initiative has the support of the Financial Services Authority.

Keywords: Pension, Annuities, Annuity, Pensions

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