The Association of British Insurers (ABI) has launched an annuity initiative that aims to encourage retirees to ‘shop around’ for the best retirement income.

Under the new code of practice, insurers will remove the annuity application form from the pre-retirement packs that are sent to pensioners before they retire in the belief that it will discourage consumers from automatically rolling over their pension savings to an annuity with their current provider.

Maggie Craig, director of life and savings at ABI, believes that consumers should look to maximise the income from their pension savings.

However, Tom McPhail, head of pensions research at Hargreaves Lansdown, said the new initiative does not go far enough.

‘What the ABI is proposing is a fudge rather than the fundamental reform which is needed to encourage more people to shop around for their annuity.

‘Consumers only get the chance to buy an annuity once, after which they are locked in; the pensions industry should be taking all possible steps to ensure they are getting the best deal available,’ he added.

McPhail suggested that insurers would still be able to include a quote for their own annuity in the pre-retirement packs sent out and that the absence of an application form could simply be construed as a clerical oversight.

He reiterated that retiring investors should be encouraged to search for the rate most appropriate to their health and lifestyle.

Mark Hoban, MP and financial secretary to the Treasury, said the new code would form part of a ‘wider package of measures’ to allow consumers to make informed decisions within the annuity market.