On 1st March 2013 the ABI (Association of British Insurers) published new guidelines on how your existing pension provider should tell you about your available choices as you approach retirement. The ABI Code of Conduct on Retirement Choices is aimed at improving customer’s confidence when the time comes to retire.
It is estimated that some 400,000 people buy an annuity each year, however many of them don’t realise that they are not compelled to buy the annuity offered by their existing pension provider. In many cases the customer could get a better annuity rate than the one offered by their existing pension provider. The new Code of Conduct gives guidelines to your existing pension provider about the Retirement Information Pack you receive as your approach your selected retirement date.
It aims to ensure that everyone fully understands the options available to them, and shops around for the best deal. On their website, the ABI claims that whilst most people are aware of what their options are, one in four people don’t feel that they fully understand their retirement options, and one in three of them don’t feel informed enough to compare quotes from another provider. That is where the people at Best Pension Annuity come in as they compare the annuity quotes from a range of annuity providers, based on your requirements, and highlight the highest quoting annuity provider. You can then compare the highest quote against what your existing pension provider is offering as an annuity, and decide what best meets your needs. Their information website also allows you to do annuity quotes online, to give you an indication of what current annuity rates might offer you based on your pension fund and age.
You should receive your Retirement Information Pack from your existing pension provider about 4 months before your selected retirement date. Under the new Code Of Conduct, this Pack should:
- explain the different ways you can take your retirement income (e.g. an annuity, a temporary annuity, income drawdown, flexible drawdown)
- remind you that you can combine pension pots if you have more than one pension, and so possibly get better annuity rates
- inform you that you can get more income if you qualify for an enhanced annuity (i.e. health issues where you take medication, or if you are a smoker, may mean that you qualify for an impaired annuity or an enhanced annuity)
- highlight any guarantee annuity rate (GAR) or other guarantee that is applicable to your pension policy that you should be aware of before exercising your open market option
- tell you what annuity rate that your existing pension provider is offering you, and therefore what level of annuity they will give you in exchange for your pension fund, so that you can compare it to what you can get on the open market via other annuity providers.
So why is all this important? Cathy Luzmore of Best Pension Annuity explained “the pension company that you have saved with over the years may not actually offer you the best annuity product to meet your needs, or the best annuity rate. Our role is to provide you with impartial information on what is available to you and what other annuity companies are offering you in terms of annuity rates, if that is the route you opt for. If you qualify for an enhanced annuity, then we will also you give you the enhanced annuity quotes that are available to you”.