Hargreaves Lansdown says RDR will not cut Omo take-up
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Critics have disputed claims that the retail distribution review will reduce the use of the open market option for annuities.
Last week, Fitch Ratings said the fact that customers would be faced with explicit fees for advice will drive some towards cheaper, restricted advice or no advice at all. It said this was likely to result in less take-up of Omo.
But Hargreaves Lansdown pensions analyst Nigel Callaghan says there are still options for clients to pay for Omo advice so the RDR should not be a deterrent.
He says: “Once the financial agreement between the client and adviser has been reached, the client can pay directly or both parties can agree for the services to be paid through adviser-charging.”
Burrows and Cummins partner David Cummins says: “The cost can either come out of the annuity fund itself or you can pay for it from the tax-free cash. I think that is how it will pan out.
“There are a lot of clients that would be quite happy to have a fee met from the fund they are investing but on the basis that it is agreed with them.”
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Readers' comments (3)
Alan Lakey | 4 Mar 2010 3:04 pm
Reducing te numbers of advisers will in itself reduce the take up of the OMO.
Many advisers will limit their activities to protection and mortgages and thus will be constrained from providing annuity advice.
The reduction will assist the banks and the holding schemes. As with most things 'RDR' the consumer loses yet again
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Evan Owen | 4 Mar 2010 4:57 pm
Yes Alan, there will be fewer IFAs in the market, is that socially useful regulation?
I cannot agree with the above commentators, the take up of OMO is low enough as it is because of the 'inertia' selling by the life office sending out a single life annuity prior to vesting.
I hope nobody listens to these rare beasts.
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David Trenner - Intelligent Pensions | 5 Mar 2010 7:45 am
I am with Hargreaves on this. Providing that the FSA wants the OMO take up to increase it will.
RDR might stop people who don't know much about annuities from selling them, but we are seeing the emergence of annuity bureaux like ACH and HL who can advise on smaller pots.
What we need is the FSA or the ABI to stop insurers selling rubbish annuities to their existing clients. That is a real scandal!
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