Sixteen providers are now on board the Association of British Insurers’ Options initiative, which has slashed processing times to eight calendar days.
Others such as Windsor Life, Royal London, Scottish Widows and Zurich should follow suit as soon as possible or at least admit they are putting commercial interests before those of their customers.
A couple of firms are looking to go a bit further, particularly to help consumers with small pension pots, who currently struggle to get advice, lock in a better deal.
Money Marketing revealed in this week’s issue that Aviva is considering selling other providers’ annuity products alongside its own.
We know that about 60 per cent of customers are buying an annuity with their existing pension provider and that the vast majority are missing out on a far better rate by not shopping around.
Aviva says the fact small pots are uneconomical for advisers is a major reason.
It is looking into tackling this advice shortage by offering other providers’ rates when it cannot beat the market.
Head of annuity marketing Darren Dicks says: “The vast majority of customers have what many advisers believe are uneconomical pots and there is a shortage of advice.
“We have a range of options, one of which is a third-party solution to offer other providers’ annuities where we cannot offer a good rate. We could do it ourselves or we could do it with an already established firm.”
Aviva will put more meat on the bones in due course but Ernst & Young financial services director Malcolm Kerr has welcomed the idea.
He says: “Smaller pots, in particular, need the best possible annuity rate and it is unlikely that Aviva is always able to provide that. I think this is a very sensible idea.”
Also unveiled in this week’s Money Marketing, Rockingham Retirement is launching a whole of market annuity service to tackle the shortage of advice for small pots.
The firm will trial the service – called the Annuity Clearing House – with Prudential, Legal & General and MGM Advantage from September. It will roll ACH out to the open market as soon as possible.
ACH will offer conventional and with-profits annuities as well as impaired and enhanced products.
Advisers will complete a medical form for their client either on the ACH website or over the phone. Rockingham Retirement says this takes just five minutes.
The top annuity rates are instantly generated on a single electronic application form, which is signed by the client.
Advisers can white-label this process or hand the case over to ACH. ACH will offer advisers 1.1 per cent commission compared with the 1 per cent they would earn if they advised on the annuity themselves.
Managing director Steve Hunt says if the system is effective, ACH will consider a direct to consumer version.
Hunt says: “Official data shows fewer people are utilising the open market option when looking for the best annuity deal. This is primarily because most people believe there is too much complex trawling of the market involved.
“But ACH will enable the individual, through their IFA, to achieve the maximum possible income for the least effort.”
Do you think either of these proposals would work? Is there a need? Let me know your thoughts by clicking on the link below.