The PBR Is suggesting that the industry’s take on use of open market option for better pension annuity rates might not be right. The Treasury has tried hard to put a positive spin on the progress of its new Open Market Option (OMO) review group, however the industry claims more recent figures point to the contrary. In the recent pre-Budget report (PBR), the government said its OMO review group is continuing to make progress in improving the provision of retirement planning information for those choosing an annuity to ensure they got the best deal when they came to arrange their retirement income. For example, it reported that since last year’s pre-Budget report, the annuity comparison table on the Financial Services Authority’s (FSA’s) Moneymadeclear website had received around 228,000 visits.
The report also stated that to date, the Association of British Insurers (ABI) has issued new guidance requiring insurance companies to inform customers of the potential benefits of utilising the OMO, i.e. getting better pension annuity rates, and has worked with the pension industry to reduce average OMO fund transfer times from 31 to 11 calendar days. Meanwhile it stated that the Pensions Regulator had looked at a small sample of trust-based defined contribution arrangements and found that 98% of those sampled did offer the OMO.
However, Steve Lowe, a director at enhanced annuity rates provider Living Time, was somewhat sceptical about the Treasury’s arguments and said recent ABI figures do not seem to back this up. He said that the latest ABI figures show the numbers of retirees exercising the OMO have fallen back once again towards the longer term average of around 33%. He added that the truth is that it is two years since a package of improvements was introduced to boost the use of the OMO and it is difficult to see any evidence of these succeeding.