Reform should not undermine annuity sector-ABI

Reforming the Age 75 rule will reinvigorate the retirement income market but care should be taken not to undermine the annuity sector, the ABI warns.

Speaking at the ABI's Savings & Protection Conference, Dr Yvonne Braun, assistant director for savings and retirement at the ABI, urged the Government not to "forget the majority of people still want to purchase an annuity as it provides the powerful benefit of providing an income for life".

She highlighted recent progress in persuading people to shop around for their annuity with 67% of people now looking across the whole market before making a purchase. This is much higher than previous industry figures suggesting it is closer to a third.

Braun noted the discrepancy was caused by people who looked at the open market option (OMO) but decided to stay with their pension provider. Overall, 40% of people purchased their annuity externally in Q1 2010 compared with 34% in Q1 2009.

While progress has been made, Braun said much work remained to be done to further raise the number of people shopping around at retirement.

According to the research, providing access to a "trusted adviser" was the strategy most likely to improve use of the OMO. A third also stated access to an online comparison tool would make them more likely to shop around.

Braun urged the need to "be realistic as purchasing an annuity is a very different process to purchasing car insurance online but we should be ambitious in our approach".