The Association for British Insurers has recently proposed a number of changes to the way annuity providers would go about paying claims. If these new reforms are implemented, citizens nearing retirement could increase their pension incomes by 20%. Nearly half a million people could benefit from these changes.
The biggest change the ABI is instituting is a new code of conduct. Under these new provisions, annuity providers would be required to take new measures to take new measures to ensure they were selling the right products to their customers. One of the most significant changes is a new policy that would require institutions selling pensions to highlight the importance of shopping around before taking out a pension.
In addition, annuity providers would be required to do a structured survey or formal intake with their customers. This would ensure that they were providing a package that satisfied the needs of their clients.
Another major change in the code of conduct is a requirement that would obligate pension providers to publish their rates. This would allow customers to make informed comparisons between providers before making a decision. Under existing policies, only firms that sell a variety of financial packages are required to publish their rates. Those that exclusively sell pensions are not obligated to do so.
According to the ABI, over half of those about to retire do not make informed decisions before purchasing a pension plan. This mistake could cost them many thousands over the course of their retirement. However, the problem is not wholly their fault. Those who attempt to make informed decisions must do so on limited information.
According to some research, nearly three quarters of retirees may be entitled to an enhanced package due to medical complications. Receiving an enhanced package could increase their package by up to 50%. However, only about a sixth of those who are eligible for the package actually receive it.
The ABI has demonstrated that it is willing to practice what it preaches. It has told its members they should cancel their pension application forms. Their members were told that these forms would likely go towards the easiest plan as opposed to the one that would be the best fit for their needs.