LONDON, March 10 British pension providers will do more to ensure customers get the best deal when they retire by providing advice and helping them shop around for annuities, the insurance industry's trade body pledged on Monday.
The Association of British Insurers (ABI) said it was acting in response to a report last month by the Financial Conduct Authority (FCA), a UK watchdog, which called the annuity market "disorderly" and criticised insurers for making excessive profits.
The report found that four out of five people would be better off by shopping around for an annuity, though 60 percent stuck with the insurance company with which they had built up their pot.
"It is critical to make sure savers have all the appropriate information they need easily to hand to make the best possible choice at retirement," said Otto Thoresen, the ABI's director general, in a statement. "This means changing the retirement process so that shopping around and providing medical information is built into it."
The ABI, whose annuity-offering members include the likes of Aviva, Standard Life and Legal & General, said pension providers will have to ask all their customers for information about their health and lifestyle so as to help those eligible to get an enhanced rate, an option many are unaware of.
Providers will also give savers a comparison of annuity quotes and will have a conversation with those approaching retirement that would include a "high-level overview of alternatives to annuities", the ABI said.
The industry body said its members would start implementing the changes now, with a target for completion by summer 2015.
Ros Altmann, a pensions campaigner and former government adviser, welcomed the reforms but said savers needed independent financial advice.
"Offering ... a conversation with an in-house team won't be enough unless there are proper protections in place. Customers need unbiased, effective communications," Altmann said.
The ABI also called on George Osborne, the British finance minister, to announce a relaxation of the rules around small pension pots in next week's budget so savers with less than 10,000 pounds ($16,700) can take their money in cash.
That option is only available to those with pension pots of less than 2,000 pounds, while those with more must buy a lifetime annuity offering a very low income.