UK insurance industry promises pension annuity reforms

By Jemima Kelly

LONDON, March 10 (Reuters) - British pension providers willdo more to ensure customers get the best deal when they retireby 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 actingin response to a report last month by the Financial ConductAuthority (FCA), a UK watchdog, which called the annuity market"disorderly" and criticised insurers for making excessiveprofits.

The report found that four out of five people would bebetter off by shopping around for an annuity, though 60 percentstuck with the insurance company with which they had built uptheir pot.

"It is critical to make sure savers have all the appropriateinformation they need easily to hand to make the best possiblechoice at retirement," said Otto Thoresen, the ABI's directorgeneral, in a statement. "This means changing the retirementprocess so that shopping around and providing medicalinformation is built into it."

The ABI, whose annuity-offering members include the likes ofAviva, Standard Life and Legal & General,said pension providers will have to ask all their customers forinformation about their health and lifestyle so as to help thoseeligible to get an enhanced rate, an option many are unaware of.

Providers will also give savers a comparison of annuityquotes and will have a conversation with those approachingretirement that would include a "high-level overview ofalternatives to annuities", the ABI said.

The industry body said its members would start implementingthe changes now, with a target for completion by summer 2015.

Ros Altmann, a pensions campaigner and former governmentadviser, welcomed the reforms but said savers needed independentfinancial advice.

"Offering ... a conversation with an in-house team won't beenough unless there are proper protections in place. Customersneed unbiased, effective communications," Altmann said.

The ABI also called on George Osborne, the British financeminister, to announce a relaxation of the rules around smallpension pots in next week's budget so savers with less than10,000 pounds ($16,700) can take their money in cash.

That option is only available to those with pension pots ofless than 2,000 pounds, while those with more must buy alifetime annuity offering a very low income.