Whilst the ABI want people to get the best annuity rates at retirement, an important issue highlighted by the pension industry is how the whole issue might be policed – how can we make sure that insurers do the right thing and that the right questions are actually being asked? The ABI states that compliance will be monitored according to a yearly signed declaration from each insurer stating they are indeed complying with the code. What else can reasonably be done to make sure the sales process is properly carried out by insurers?
Living Time’s director Stuart Wilson suggests that compliance issues lie at the crux of the matter and again he believes the pension passport idea put forward by trade body PICA can assist here as it takes people through a properly defined process and by the end of it both the financial adviser and customer can prove that certain relevant questions have been asked and this provides a satisfactory audit trail. As it stands currently insurers could just tuck information away at the back of the pre-retirement wake up pack and therefore we need to ensure the process is properly policed by the appropriate bodies, he believes.
However, for many the issue of unsolicited annuity rates illustrations is really only part of a wider issue that needs to be considered and tackled. According to Axa Wealth’s Mike Morrison clients need to understand more about the various options available to them before they are able to make a proper informed decision about how to take their retirement income. He states that he is caught somewhere between the PICA argument that says shopping around using the open market option should be the default option and the fact that many clients still don’t understand the various options open to them.
Morrison adds that shopping around using the open market option for the best annuity rates is good news for those with reasonable pension funds but if they don’t understand the process involved properly then what benefit are they actually getting? We really need to build in an education process in the first place and also start asking straight questions of clients about their retirement income requirements because if clients don’t know what they are looking for then how can they be expected to find it, he concludes. I agree.
