The insurance industry has unveiled a new code of conduct which aims to ensure consumers approaching retirement will be given better advice about their annuity options.
The Association of British Insurers (ABI) has confirmed that new guidelines will be introduced which will force insurers to give more information to customers about how they can shop around for an annuity and also encourage those with health issues to apply for an enhanced policy.
It follows months of pressure from consumer groups and politicians who have criticised the lack of guidance given by annuity providers to consumers.
A recent report from the National Association of Pension Funds (NAPF) estimated that the current way in which annuities are sold was costing retirees as much as £1 billion in lost pension income.
Those who fail to look for the best annuity deals, or are even unaware that they can shop around, could see their pension income cut by around a third, according to the report.
The new code aims to eradicate these failures in the current system, with providers set to give customers access to information which will allow them to make an informed decision about products suitable to their needs and lifestyle.
In addition to highlighting the details of enhanced annuities, ABI members will have to clearly signpost customers to external support and advice and give a clear picture about how their products fit in the wider annuity market.
Otto Thoresen, ABI director general, claimed the changes represent a "big step forward" for those considering their retirement options.
"Improved processes, better signposting and transparency will combine to make customers more confident and more able to make decisions about their retirement income," he said.
"This is not the end of our work helping customers to get the best deal at retirement; we will continue to work with key stakeholders including government and the advisory community to improve the customer experience."
The ABI confirmed that its 300-plus members are set to adopt the new code of conduct by March 2013.
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