A code of practise has been drawn up by the Association of British Insurers (ABI) to ensure that everyone who approaches retirement age should have all of their pension options broken down and explained in detail to them by their provider.
The new codes comes in effect today and means that all insurance companies must let their clients know that they can shop around for the best deals on annuities and other products.
Industry experts have long criticized the fact that a lot of pension providers do not advertise the fact that customers do not need to buy their annuity from them and do not advise them to shop around and buy it elsewhere.
In 2012, 55% of pension policy holders purchased annuities from the same company who looked after their pension.
In a bid to encourage people to shop around for the best annuity deals, insurers will no longer put application forms for annuities in the information packs they send out to people coming up to retirement age.
All insurance companies that are members of the ABI and provide pensions must adhere to the code. Currently, approximately 95% of insurers who provide defined-contribution pensions are member of the ABI.
In addition, the ABI is also going to publish information about the different annuity rates that are currently available to help pensioners get the best deal for their money.
Other practises that have been included in the code are:
Sending out information packs about retirement options two years prior to a person coming to state pension age, to help them to find the best retirement solutions for them.
Following up this with details of how to combine smaller pension pots, six months prior to retirement and then again 6 weeks before a person is due to retire.
Explaining to clients that ill health and lifestyle choices may mean a customer can get a better deal on their annuity.
However, some pension campaign group worry that the code of practise could go much further.
With almost 400,000 annuities with an average value of £28,000 sold to pensioners in 2012, campaigners want to ensure people get the best information possible before they invest their money.
Director General of the ABI, Otto Thoresen, said: “The timely, clear and relevant information provided under the code will significantly increase the number of people reaching retirement with the confidence to make the right pension decision.”