ABI has no accurate figure of OMO take-up
The ABI does not have a figure for the proportion of annuity customers exercising the open market option, it has been revealed.
It has emerged that while it has figures for the proportion of people switching provider at annuity purchase, this includes those switching under blanket deals between holding pension provider that do not offer annuities and annuity providers.
The ABI says the proportion of people switching provider has increased from 35.9 per cent to 44 per cent in the last year. But it has now admitted that this figure includes annuities bought by individuals switching under bulk arrangements between providers without annuity offerings and established players.
That 44 per cent figure includes annuities put in place through tie-ups such as those between Skandia and Legal & General, and between Royal London and Prudential.
Annuity experts had been surprised at the increase in the number of those switching, arguing this did not chime with experience in the market where volumes appeared to be falling for most OMO advisers.
The ABI says its statistics show that external purchases are highest for people with larger pension pots - with over 60 per cent of people with pension pots of between £50,000 and £300,000 purchasing externally, going up to 77 per cent for those between £200,000 and £250,000. It says the external purchases through tie-ups are concentrated at fund sizes of up to £10,000, where external purchases still make up a third of purchases but fewer companies offer a rate on the open market. It says only a handful of providers offer this tie-up service.
Stuart Bayliss, of Better Retirement Group says including these customers, who have defaulted to the annuity provider put in place by their pension provider, distorts the reality of the actual numbers shopping around. He says he flagged up the need to differentiate between the two sets to the ABI some time ago, but his request has been ignored.
Bayliss says: “I am disappointed to find that this is the case as I have raised the issue of these relationships distorting the numbers of those exercising the open market option with the relevant ABI officials on a number of occasions. The number of people switching provider is not the same as the number exercising the open market option, particularly Royal London’s deal with the Pru as they are rarely in the top three.
“I very much doubted the open market had been expanding as there are large specialist advisory firms out there that have been seeing volumes falling not rising.”
Tom McPhail, head of pensions policy at Hargreaves Lansdown says: “The ABI has no robust data to stand up its claims of numbers shopping around. They have agreed that the data is a problem, but they seem to be happy to take the data they do have and use it out of context as evidence that take-up of shopping around is improving. To my mind that is inappropriate.”
Dr Yvonne Braun, assistant director, savings and retirement, ABI says: “As part of measuring the success of its code, the ABI will discuss with its members how to improve its collection of annuity statistics so that we have a clearer picture of what is going on in the market and how consumer outcomes are changing.”