In a challenge to the high street banks, Nationwide Building Society will announce today that it is entering the pensions market by selling annuities for the first time.
Consumers who are ready to retire will now be able to buy an annuity — a regular income, until death, based on the size of their pension pot — from Nationwide's branch network.
The society has trained up 500 staff members and will offer plans from six key providers — Aviva, Canada Life, Just Retirement, Legal & General, LV and Partnership.
In a big change, it will offer annuity advice to those with a pension pot of just £18,000, much lower than many existing advisers. The move will be watched closely by the big banks as the annuity market is expected to open up next year following the industrywide Retail Distribution Review.
About half a million annuity contracts were sold last year but the market is set to grow to 850,000 annually in the next two years as the baby boomer generation — those born after the Second World War — retires.
Until recently, most people simply took the annuity offered by their pension provider — normally an insurance company. But that changed with the introduction of the open-market option, which forced pension firms to tell customers they could shop around for an annuity. Conservative estimates suggest that could generate returns of around a third better.
Guy Simmonds, head of product for protection and investments at Nationwide, said it was crucial to offer choice: "Many people think they have to buy their annuity from their pension provider. But that provider may not necessarily offer the best deal."
Andrew Hagger of comparison website Moneynet said Nationwide was "a trusted brand", adding: "The building society has stolen a march on its rivals by getting in early with its annuity offering."
In a separate move, the Association of British Insurers will today announce a new mandatory code of conduct, to ensure customers have access to information to make an informed decision about annuities.