Has the NAPF got annuity reform wrong?

The NAPF says retirees with £50,000 or less are unable to access advice and often get poor outcomes – but IFAs tell a different story …

The NAPF has set out its viewpoints on the success of the open market option (OMO) so far, highlighting its perception of financial advice, and even challenging the Association of British Insurers (ABI) to up its game on consumer outcomes.

It has proposed radical reform of at-retirement rules for providers.

However, some advisers have said the NAPF has a skewed perception of the problems retirees with small pots face on the ground.

The NAPF’s view

The NAPF published a report in conjunction with the Pensions Institute (PI) which claimed retirees were losing £1bn per year in future retirement income by failing to adequately shop around for an annuity or take advice.

It also produced a response to the ABI’s consultation on creating a code of conduct for insurers to improve their encouragement of the OMO.

The NAPF suggested insurers signing up to the ABI’s code should have to make shopping around the default, and provide a list of specialist annuity brokers when they send wake-up packs to customers who are approaching retirement.

Access to advice

The NAPF has based its recommendations on views with which some advisers have disagreed vehemently.

The association claimed specialist annuity advisers are “few and far between” and most people with pots of £50,000 or less have extreme difficulty finding an adviser who will take the business.

It claimed finding an annuity broker “is a lottery unless the member is directed to an appropriate firm and their basic data passed on automatically”, which is the case in some corporate advice situations.

The NAPF claimed online resources such as unbiased.co.uk and findanadvisor.org “do not help” consumers find IFAs.

Finally, the association said the retail distribution review (RDR) will shrink the annuity advice market by up to 50%.

Challenging the NAPF

The £50,000 figure has perplexed several IFAs, for whom small annuity pots form a constant stream of work.

Katherine Oxenham, client director at Annuity Direct, said she was “mystified” by the NAPF’s comments.

She said Annuity Direct, as a specialist firm, will write annuity business for funds down to £500, but admitted this was unusual.

However, she added: “Given that the average fund size of annuity we wrote last year was £53,000, anyone who is not looking under £50,000 cannot be doing much volume.”