These must include information about combining small pots and shopping around, not just highlighting the best rate but the need to choose the right options to provide for dependants and to protect against inflation, plus the potential higher income available for lifestyle factors or medical factors that may result in an enhanced annuity income.
Last year, of those people purchasing from their existing provider, less than five in every 100 purchased enhanced annuities, a far lower proportion than those buying through intermediaries. Going forward, providers must highlight where they do not offer enhanced annuities and signpost customers towards other sources of advice and information.
These pension companies will no longer be able to send annuity application forms until after contact with the customer and a number of key mandatory questions have been answered, including making them aware of any risk resulting from the answers. A personalised illustration must be provided to the customer before the sale of an annuity is completed, again highlighting the potential benefits of shopping around.
Of course there have been initiatives before to try to boost OMO take-up, some of which have led to temporary gains. The real key is to get each pensioner, for who this is likely to be a one-off purchase in an unknown market, to understand the value of seeking professional help.
The new code recognises this and customer material must include links to sources of information such as the Money Advice Service and Pensions Advisory Service. The role that professional intermediaries play in delivering good outcomes to consumers is also acknowledged and the code makes provision for “a suitable directory of specialist retirement income advisers” to be added once available.
The Pension Income Choice Association has been mobilising a number of industry groups to arrange for the directory to be built and intermediaries should follow its progress and get involved at the earliest opportunity.
The intermediary directory will be a searchable database and a direct point of contact for anyone seeking professional help. It has the potential to become the shop window for all those approaching retirement, available online with clear information and easily accessible information about what advice and guidance is on offer from each intermediary. Those appearing on the database must conform to the ABI code on the sales process, such as the mandatory questions about the client’s personal circumstances, their lifestyles and any health issues.
