Having saved for retirement through an insurer for decades, many consumers in the UK automatically select the same insurer as the provider of an annuity.
By not exercising their right to shop around for the best annuity rate they may be doing themselves a costly disservice, a risk industry body the Association of British Insurers (ABI) believes its new initiative will eliminate.
The ABI’s solution to the problem comes in the form of a compulsory code of practice that will compel insurers to remove the annuity application form in the communications they send to their customers.
Commenting, ABI director of life and savings Maggie Craig said: “Not enough people shop around currently. This new industry initiative has been developed to make a significant difference to people’s retirement outcomes.”
According to the ABI, an increasing number of consumers are already buying an annuity from a provider which is not their pension provider – 46% of consumers in 2011 compared to 35% in 2008.
In addition, noted the ABI, about 70% of people consider switching provider.
However, the remaining 30% of who do not shop around may be losing out.
The ABI noted that 650,000 people turn 65 in the UK every year. This indicates that almost 200,000 people may not be getting the best possible deal on their retirement income.