Nest predicted to boost Omo and shake up annuity market
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Pensions minister Steve Webb says Nest will encourage take-up of the open market option if it goes ahead.
Nest is subject to a Government review but, speaking at the Association of British Insurers’ saving and protection market conference last week, Webb said that the number of people who would be involved in a national scheme built along the template laid out would radically change the at-retirement market.
He said: “We are in for a step-change in the market. If Nest goes ahead, it will not be long before we have millions of people whose savings will have to be converted to annuities.”
Webb said the Omo system still has work to do and this will become even more important when people start retiring from Nest as, unlike other pension schemes, it is simply an accumulation vehicle and not designed to pay out benefits.
He said: “The emphasis has been on accumulation until now. Nest will not give you a pension. Every Nest pensioner will have to shop around and this will have a transformational effect.”
Hargreaves Lansdown head of pensions research Tom McPhail says that annuity prices are going to come under more pressure but not necessarily just from Nest.
He says: “There is a fundamental shift in the retirement market. We are very rapidly moving into a defined-contribution world. The savers coming out of Nest with relatively small pots of money are something that the pricing actuaries of annuity providers are going to have to watch with interest.”
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Readers' comments (2)
Julian Stevens | 22 Jul 2010 5:57 pm
NEST won't go ahead, so who cares about a prediction such as this? They still haven't found anyone to handle the investment end of things and the charges are a joke ~ and they don't even include a margin for advice! Worse than stakeholder, and look what a damaging fiasco that's turned out to be.
Even if NEST does go ahead, the opt out rate will be high because people no longer have any faith in pensions. In fact, they're positively antipathetic towards them.
And anyway, the most pressing issue is not to steamroller ahead with auto-enrolment (as the FSA is hell bent on doing with the RDR, despite an even more inaccurate Cost:Benefit Analysis). The top priority has to be to scrap forced annuitisation (and, by association, the forced use of retirement income products shackled to GAD Rates).
Carrot is better than stick. Why cannot government ministers see this? Maybe David Cameron ought to set up a Ministry of The Bleedin' Obvious ~ I'd take the job of Chief Exec for a mere £100K p.a.
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Jim shanckshort | 23 Jul 2010 9:29 am
i think the 'omo's need all the help they can get
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