New guide helps customers shop around for an annuity

Pension providers will do more to encourage customers to shop around before buying an annuity, as outlined in a new 'Best Practice Guide for the Retirement Process' published by the ABI.

The guide sets out the principles pension providers are expected to follow and key requirements they must meet to help increase customer understanding of retirement and purchase the right annuity for their circumstances.

The guide makes it clear that providers will encourage customers to shop around before offering them the opportunity to buy an annuity. The customer will be sent all the information they need to shop around 4-6mths before they retire, with no default automatic annuity offer made until 6-10 weeks before the retirement date. This means that customers will have the time and information they need to make shop around for the best annuity for them. The benefits of shopping around for an annuity will be clearly set out to the customer.

Helen White, the ABI's acting Director of Life and Savings, said: "Pension providers have made huge strides in improving how they communicate with their customers during the retirement process. This guide now cements together best practice so that customers can be confident they have all the information from their pension provider to help them make an informed choice and shop around for the best annuity on the market for them.

"With nearly half a million people expected to buy and annuity this year, it is hoped the guidance will have an impact on a great many of consumers."

The ABI is also in the process of producing a template shopping around form for customers, which will help them to compare annuities. This will also form part of the guidance.

The average time taken to transfer funds between pension and annuity providers continued to fall during 2010, with the average time to make a transfer taking just 10 calendar days, thanks to the insurance industry's Options Initiative.  2010 also saw the number of pension providers using Options increase as well as the number of transfers made continue to rise.

For more information, visit abi.org.uk.