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ABI to force all providers to publish annuity rates

Stephen Gay ABI

The Association of British Insurers has tabled proposals which will force all annuity providers to publish information on the rates they offer to customers.

The trade association has today set out plans to conduct a regular rate survey of members as part of its shopping around code of conduct, due to be launched in March next year.

The survey will set a number of hypothetical customer profiles and ask what income each of these would receive from an annuity.

The results of the survey will be published on the ABI website every two months.

The ABI says: “The requirement to respond to the survey will be part of the ABI’s compulsory code of conduct. It will apply to all ABI members providing annuities and/or pensions, regardless of whether they are currently competing for annuity business or not.”

The ABI says it stopped short of proposing that all customers can see the actual rates they would get from their pension provider and others in the market because of the costs involved.

ABI director of life, savings and protection Stephen Gay (pictured) says: “For the first time we will be publishing rates of companies who only offer rates to existing customers as well as companies competing on the open market.

“Buying an annuity is one of the most important financial decisions people make and shopping around for the right one can make a significant difference to people’s retirement income.

“Making the market more transparent is a further step in helping people with this decision. We want to get this right so are launching a consultation on our plans and welcome feedback from a wide range of stakeholders and insurance companies.”

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. David Trenner - Intelligent Pensions 7th November 2012 at 11:10 am

    I am always quick to have a go at the ABI, but this time it looks like they have it right!

    The danger will be companies quoting better rates for e.g. M65 F62 50% widows, level, to look good in the tables, but not offering comparable rates to e.g. M65 F66 etc.

    Would anyone be devious enough to do this? Well just look at the yield on 25 year with profit endowments compared to that on other terms! (I suspect these are history now, as no-one buys WP endowments any more!)

  2. Positive move. ABI will need to keep on top of it though, to avoid manipulation of short-term rate improvements when the survey is due.

  3. And this will help consumers?

    Without taking advice how do they know which route to go down – its like saying one car is better than another as its cheaper when really it all depends on what you want from the car.

  4. @anon 11:43. Even if it is not exact, it will at least provide tangible indications to consumers of the impact of not shopping around. Glass half full.

  5. @anon 11:43, I concur. The large Enhanced Annuity providers would have us believe the majority of annuity customers would be entitled to an ill health enhancement to their annuity. Enhanced aside, the big annuity players all use postcode as a factor in pricing their annuities The ABI can only hope to compare the most basic form of rates, excluding impaired life, postcodes, lifestyle, investment annuities, etc.,
    Such compulsory rates would offer very little value to the consumer. It’s one of the only things the Money Advice Service does that adds value. The ABI would be better served directing consumers there and putting pressure on it’s members to provide data to MAS. There are other live portals that do this job, the market does not need another ill thought out comparison service.

  6. Good idea in principle but annuity rates change more than every two months. Figures could easily be out of date within a week. WhenI worked in the industry no company gteed annuity rates for 2 months. There would have been actuaries having heart attacks if you even suggested it.

  7. Are we in danger of going too far and falling into the trap that too much information will put consumers off and they will simply make do for for an easier life.

    I think the key is to ensuring that people are encouraged to shop around and to understand what their options are whether that is through an IFA, their employer, friends and family or MAS.

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