Labour plans to investigate the merits of “annuity safe harbours” to reduce the risk of people making the wrong annuity choice when they reach retirement.
An International Longevity Centre policy paper on the advice gap and the RDR, published last week, suggests a possible solution to savers buying the wrong type of annuity could be to change at-retirement default options.
Currently, people who do not make a decision are automatically defaulted into a single-life annuity. The ILC paper suggests this should not be the case for people who are married, who would likely be better off buying a joint-life annuity.
Speaking at an ILC debate in the House of Lords, Labour Shadow pensions minister Gregg McClymont (pictured) said the party is keen to explore the idea of annuity safe harbours.
He said: “The paper explores the idea of better safe harbours and that is an area we are interested in talking to the industry about.
“There will be a need for better defaults and I do not think it is fair for the industry to expect the consumer to make all the right choices on their own.”
McClymont also suggested the pensions industry could follow the energy sector, where providers will eventually need to tell each customer what the best deal on the market is.
He said: “I think we are moving towards that place in pensions.”