Myth 1: Insurers do everything they can to hold on to their customers and sell them annuities when they get to retirement.
Our members are absolutely committed to helping customers make the right decisions at retirement.
The ABI Code of Conduct for Retirement Choices, which is a compulsory condition of ABI membership, aims to bring about a culture change in how members communicate with customers about the decisions they need to make. It requires members to guide customers through a three-stage process, which asks firstly whether customers want to retire, trivially commute, and introduces different product options, then highlights the benefits and risks involved in different annuity shapes, including the higher income available from enhanced annuities, and finally hammers home the benefits of shopping around.
Our members have also agreed to publicise rates regularly in a survey, available. This annuity window shows rates from across the market, including from those providers only offering annuities to their existing customers. It generated a lot of media attention when it was first launched in August, which highlighted the difference between the best and the worst rates, and the critical importance of shopping around, which is exactly what we intended. While originally conceived mostly for a media audience, it is also the most popular part of the ABI website, with 26,000 hits in the first week alone. We hope that advisers can make use of it as well.
Myth 2: The industry thinks that customers can do it all alone and wants to cut advisers out.
We regard expert help with retirement choices as critical, and the advisory community as an essential partner in achieving better customer outcomes. Most customers do not have an existing adviser. This is why our members signpost to sources of help, guidance and advice, including unbiased.co.uk. Many ABI members also refer their customers to an advice or shopping around service, for example Fidelity's retirewise® service, giving customers access to annuity rates from across the market.
If anything, advice will become more important still as people’s needs are becoming more complex and retirement is turning into a process, not an event.
Myth 3: The ABI thinks it's all about annuities.
We don't think that annuities are the only show in town. Our policy development has focused on annuities because of the sheer number - over 400,000 customers - annuitising each year. There are other products offering more flexibility (but also involving more risk) that many people will also want to consider. Having said that, the benefits of annuities should not be underestimated – ultimately, they offer a guaranteed income until death.
Myth 4: Everyone will go non-advised now
Some commentators have misread our statistics to infer that there has been a huge post-RDR increase in non-advised sales. But that is not the case. Our statistics show that most open market annuity sales in 2013 have been through an IFA. It is clearly the case, though, that the economics have changed; we estimate the average advised annuity is purchased with a pot of around £50,000, about double that of a non-advised, internal annuity. It is likely that more of the customers with moderate funds who want to shop around will choose a non-advised service. So we welcome efforts to improve standards in non-advised sales, extending the principles of our Code.
And finally…
We'd really welcome your insights - you are at the coalface helping customers, and really understand their needs. So please get in touch with me and my colleagues if you have experience of how our Code of Conduct is working in practice, or ideas about how to improve the retirement process: [email protected].
Please note: The opinions, beliefs and viewpoints expressed by our contributing authors do not necessarily reflect the opinions, beliefs and viewpoints of unbiased.co.uk.
