ABI annuity code is a ‘fudge’: McPhail

The Association of British Insurers’ (ABI) annuity code of conduct is not radical enough, Tom McPhail, head of pensions research at Hargreaves Lansdown said.

Yesterday the ABI announced it will create a compulsory code of conduct for members designed to improve the shopping around process for annuities.

Its main proposal was to forbid insurers from including application forms for its own annuity products when sending retirees information packs about their savings.

However, McPhail said dropping the application form from information packs is not enough to push annuitants into shopping around.

"What the ABI is proposing is a fudge. Insurers will still be able to include a quote for their own annuity, which may be significantly less than the best rate available on the market," said McPhail, who is also chair of the Pensions Income Choice Association (PICA).

"Presented with this quote consumers are still likely to accept it, even if they do not have the means to do so immediately to hand.

"The absence of an application form could easily be mistaken for a simple clerical error."

McPhail added consumers need more and better pre-retirement information on shopping around for annuities to encourage use of the open market option.