Insurers selling pension annuities will be forced to provide a quote comparison to customers that tells them if they can get a better deal elsewhere, under new rules coming in next September.
The new rules will mean that providers will have to include a figure showing how much more a customer could get elsewhere, along with a link to a price comparison site.
Four out of five annuity buyers could get a better deal, the Financial Conduct Authority (FCA) said, due partly to the fact that most consumers do not shop around for the best deals.
Those that do, could gain up to £171 a year.
The new rules will cover only standard annuities, and will not cover enhanced annuities for those who could get a better deal owing to a shorter life expectancy.
Insurers will also have to show key features of the policy on the same page, including whether a surviving partner would continue to receive an income and whether the income would rise with inflation,
BBC News reports.
Since the government’s pension reforms, which gave savers more control by allowing them to cash in pension pots and spend as they wish, annuity sales have decreased significantly.
“Any attempt to encourage more people to get better value from their retirement savings is welcome, although I fear this may not be enough to solve the issues with the market,” Andrew Tully, pensions technical director at Retirement Advantage, said in the BBC report.
“The problems are deep rooted and far too many people continue to receive poor value from their annuity due to the lack of shopping around. Ironically, since the introduction of the pension freedoms, the situation has actually got worse, so we need some radical thinking.”
Rob Yuille, head of retirement policy at the Association of British Insurers, commented: “Customers should have the information they need to make the right decision for them. Annuity providers will look at what the FCA has proposed and provide helpful feedback on how to make the plans work successfully for customers in practice.”
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