The Association of British Insurers (ABI) has responded to concerns too many pension scheme members are unaware of the Open Market Option (OMO) by publishing new guidance to providers.
The guidelines have been designed to ensure ‘wake-up’ packs, sent out to members as they near retirement, clearly state all the options available to customers and point out they could increase their retirement income by shopping around.
The ABI says customers should receive a brief summary of the OMO and the different types of annuity available as well as other key options that should be considered.
The ABI is one of a number of associations, firms and bodies that has expressed unease over the number of consumers apparently unaware of the OMO.
In the most recent example, retirement income firm Living Time called for a ‘campaign of change’ in the pensions industry, and argued too many consumers were locking in to what it called “outdated” lifetime annuities.
Maggie Craig, ABI director of life and savings, says the guidance has been developed with pension providers, consumer groups, the Government and the FSA.
“We are determined to improve the experience of customers approaching retirement.
“This means ensuring they understand their options, including their right to shop around, so they can make an informed decision, and letting them know where to go to get help.
“Buying an annuity is a once in a lifetime decision that can’t be changed, so it’s vital that customers are given appropriate help to make the right choices, and make the most of their retirement income.”
Craig says the ABI’s next move will be to improve the time it takes for annuity payments to be made.
“An industry initiative to find new ways of speeding up payments already has the majority of providers on board,” she says, adding further details will be announced later in the summer.
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