Pension experts have warned the failure of trust-based schemes to adopt new shopping around standards could leave millions of people at risk of receiving an inferior annuity.
On 1 March, the Association of British Insurers will officially launch its compulsory shopping around code of conduct for providers.
The code will force all ABI members to provide savers with clear information about their options when they reach retirement.
Speaking during a panel debate at the ABI’s London offices on Tuesday, Just Retirement group external affairs and customer insight director Stephen Lowe said: “There are approximately 2.5 million people in trust-based defined-contribution pensions that are not protected by the implementation of this code.
“The Pension Income Choice Association has called upon Bill Galvin, chief executive of The Pensions Regulator, to implement the same or similar standards to those in the ABI’s code and avoid those in trust-based DC receiving a second-class service.”
Hargreaves Lansdown head of pensions research Tom McPhail said: “There is clearly a big issue with trust-based schemes and shopping around.
“One possible solution would be to say a scheme cannot be used for automatic enrolment unless it has a shopping around process in place.”
National Association of Pension Funds head of research Mel Duffield said: “Trustees do not have the same vested interests as insurers so you would hope that consumers would be better protected.
“But we take the point that trustees could do better and are interested to hear specific recommendations as to what trustee boards should be doing in this area.”