Mercer welcomes The Association of British Insurers’ compulsory code for annuity providers released on 5 March 2012 and repeated its call to make good-quality pre-retirement advice to members mandatory for all DC schemes, including trust schemes. In response to the code’s emphasis on making members shop around for annuities Mercer suggests that, to make a real difference to pensions outcomes, providers need to automatically direct scheme members to market-based quotes. This should be done before they even see a quote from the holding insurer.
Paul Macro, Head of DC for Mercer’s Retirement Business in the UK, said: “It’s all very well saying that members need to shop around for annuities, but most people don’t know where to start and would probably just stay with their current provider. The code tells providers not to rely on customer inertia, however this is incredibly difficult to police. By offering members a range of market-based quotes up front, and not just a quote from the sitting insurer, the member’s chances of purchasing a far better annuity are greatly improved.
“Communication to members in the lead up to retirement must encourage members to shop around. To reinforce this message members should be told that any quotes from the sitting insurer are unlikely to be the best available in the market, and this needs to be prominent, rather than tucked away at the end or buried in the small print.”
Mr Macro added: “Although the code itself is a positive development it is very disappointing that compliance with it is not being made mandatory earlier than March 2013. In the meantime 1000’s of retirees will be losing £100’s or £1000’s of pounds a year in income for the rest of their lives.”
With the introduction of auto-enrolment later this year, Mercer urges the Government and the Pensions Regulator to look at making the provision of an annuity broking service a key aspect of what a good workplace pension plan offers.
|
