Written by Jon Dean on Tuesday 11 February 2014
As Financial Services practitioners it’s easy to forget how much we take for granted our knowledge of pensions and how they work. But try stopping someone in the street and asking them what an annuity is, and you may well be met with a blank stare. This word, rooted in the 15th century, is just one of many pieces of industry jargon. With such beauties as Benefit Crystallisation Events, Commutation, Immediate Vesting, Limited Price Indexation, PCLS and Open Market Options, many of them created out of legislation, is it any wonder that the industry is so keen to emphasise the need to take advice at retirement?
High profile campaigns by the Sunday Times, Daily Mail and the Financial Services Consumer Panel are all calling for further regulation. Greater transparency and regulatory scrutiny for online annuity broker costs, simpler small pot rules and legal enforcement of the ABI code of conduct are each suggested by two of the three campaigns. Other ideas range from forcing all insurers to underwrite all annuity quotes to providing a free money health check to all 50-year-olds. Not all of the proposals are necessarily practicable or affordable, and I have some sympathy with members of the ABI whose code of conduct already goes some way to offer help to customers.
I followed the journey of a retiring customer from receipt of an ABI-template wake-up letter – three carefully crafted and simply worded pages explaining all the basics to getting a retirement income. While there is a bias of information towards annuities, other income vehicles are described and customers are rightly sign-posted to seek professional advice. My difficulties began when I followed the link to the Pensions Advisory Service website, with over 700 small font words on the home page and no mention of the online annuity planner referenced in the letter.
I eventually found it in the online tools menu, and the real complexities of the retirement decision became apparent. The planner makes a reasonable fist of explaining the process, given a little patience, even if some of its help links don’t work. There is a click-through to the MAS annuity comparison site but it needs to be made clearer that its panel does not include all providers.
As a pension expert it is impossible to truly see the lay customer’s experience first-hand, and all credit to TPAS and MAS for the service they do provide, but I can’t help thinking that these online help services could be even simpler and more seamless.