Annuity providers can no longer keep better rates offered by rivals secret under new rules introduced by regulators.
From Jun 7, 2017, providers must tell consumers if they could improve their retirement incomes by switching to another firm.
They must also tell consumers if they could expect even more income by qualifying for an enhanced rate due to ill health or lifestyle conditions.
Although providers have until March 2018 to consider how to word the enhanced annuity warning, the Financial Conduct Authority says they can include the details straight away if they wish.
The measures were prompted by consultations by the FCA that revealed 60% of consumers bought an annuity from their pension provider even though 80% of them could have found a better deal paying more retirement income if they had shopped around other providers.
Annuity sales have plummeted since pension freedoms were introduced in April 2015, but still total around 80,000 a year.
The FCA also wants providers to simplify quotes and to use an industry wide template to make them easier for consumers to understand.
“The FCA will not require providers to indicate from where the higher quote can be obtained, although firms will be able to do this if they choose to do so. Once the information prompt is in force, it will monitor whether more consumers are choosing to switch providers and, if not, consider whether to make the provision of this information mandatory,” said the FCA.
“Plans to extend the same disclosure requirements to telephone sales have been amended by the FCA following consultation.
“Rather than require firms to provide a comparison for every quote given during a telephone call, they will only be required to do so once the consumer has confirmed that they would like to proceed with a guaranteed quote.
What is an annuity?
“This measure gives the consumer the benefit of the information prompt while reducing the risk of disengagement.”
An annuity is an insurance contract guaranteed to pay a specific amount every month until death.
Income is calculated by taking a formula that includes age, health, gilt yields and interest rates.
While Bank of England interest rates and gilts have plunged in recent years, annuity rates have collapsed as well, leaving many who invest with poor offers from providers.