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Increasing OMO take up only part of the battle
We have been talking about increasing take up of the open market option for some time now. However, what is becoming clear is that increasing OMO take up is just one part of the battle if we are to improve retirement outcomes.
Many of the services on offer operate on the assumption that an annuity is the right product to buy at retirement and encourages retirees to pick the highest number and feel they've got a great deal. Such an approach leads people to dismiss options such as income drawdown too early on in the process.
While annuities are the right option for many people more care needs to be taken as to making sure the right type of annuity is chosen. Does the retiree have health issues for instance? Can they afford to take investment risk and do they want an income that rises in line with inflation? Timing is another important factor. These are just a few of the considerations that need to be discussed with clients looking to take a retirement income.
Purchasing a retirement income is an important -and sometimes a one-off - decision and retirees should not be left to their own devices. I hope that when Steve Webb sets up his decumulation task forces he urges them to look at how these people can access appropriate advice and support to help them with their decision.
Editor, Retirement Planner