The pensions industry is facing calls to introduce an industry-wide annuity clearing house as part of radical proposals to make shopping around at retirement compulsory.
The Association of British Insurers is currently working through details of a new shopping around code of conduct for pension providers designed to increase take-up of the open market option.
Centre for Policy Studies research fellow Michael Johnson (pictured) says insurers should develop a clearing house system within which all annuity providers would participate.
Under Johnson’s proposals, a standard form would be sent to the clearing house, via the pension pot administrator, around three months from retirement detailing any health issues and the type of annuity required.
Providers would then bid for annuity business on a daily basis.
Johnson says: “This process should introduce pricing tension and, with all transaction prices being published at the end of the day, the transparency that is currently lacking.
“Individuals would then have the information they require to choose the particular annuity which best suits their needs.
“If the financial services industry fails to establish an operative annuities clearing house within two years, the coalition should itself facilitate a national annuity support and brokerage service.”
Johnson says small pension pots could be “packaged together” ahead of bidding to encourage stronger bids from providers. He says the clearing house would also create a “tailored market” for enhanced annuities.