With estimates of as many as 150,000 people each year failing to shop around for a potentially-better annuity deal, execution-only broker Hargreaves Lansdown has published a five-point blueprint for retirement income reform.
It said it had consulted regulators, government departments, trade bodies and consumer groups before developing its ideas.
Hargreaves' blueprint for retirement income reform
1 Make pensions easy to understand: No more gobbledy-gook. Clear, simple messages are required, so we'd like to see annual pension statements with very clear messages about how much income investors are likely to get in retirement.
2 Make shopping around easier to understand: The Pensions Passport. The Financial Conduct Authority inherited its rules on the Open Market Option from the Financial Services Authority, but these rules are now hopelessly out of date.
Instead of the lengthy and impenetrable wake up packs which insurers companies send out and investors don't read, everyone should be sent a simple one page pensions passport statement to trigger the shopping around process.
3 Help investors make the right choices: The three 't's of retirement. The retirement income journey should be about Timing, Type and Terms.
Every investor should be able to decide when they draw on their savings, what type of retirement income plan they use (such as annuity or drawdown) and finally they should shop around for the best possible terms for their specific needs.
4 Reform the Small Pots rules (known as Trivial Commutation in the industry). For investors with pension pots below around £10,000 there simply isn't a competitive market. The government should make it easier for them to just have their money back as a lump sum.
5 Minimum standards for the retirement industry. Some of the companies looking to take a slice of investors' retirement pots aren't even regulated and just act as lead generators (a problem highlighted by the Financial Services Consumer Panel in its report last year).
Helping investors convert their savings into a retirement income is an important and responsible job so we'd like to see all intermediaries and product providers conform to minimum standards.
For example by offering guaranteed deeply underwritten quotes only, with no indicative figures, offering trained and knowledgeable staff on a helpline; not just offering annuities but drawdown too; offering regulated advice if required.
Hargreaves Lansdown head of pensions research Tom McPhail (pictured) said: "We know there are significant failings with some parts of the system, however we also know that every year hundreds of thousands of investors do successfully shop around and secure a good pension income for life.
"We believe all investors should be able to benefit from a simple and competitive retirement income market. We have been lobbying for reform for years now; recent developments suggest that we are finally making some headway."
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