Pica presses for wake-up to rule out reflex purchase
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The Pension Income Choice Association wants retirement wake-up pack changes so clients can no longer buy an annuity from their existing pension provider simply by putting their signature next to the quotation.
Chairman Tom McPhail says making it harder for people to roll over into an annuity with their existing provider will force them to shop around.
He says: “We think this has been the problem all along. People take the path of least resistance, particularly when they are not financially literate and where they are being presented with a complex decision they have no experience dealing with.
“As part of this lengthy pack, there is a line that says ’by the way if you just sign this form we will give you your income’. What a surprise, people sign the form and send it back. That is why take-up rate of the open market option is still stuck at a third of investors and has not shifted for years.”
Pica proposes giving clients a single page to fill out their fund size, date of birth, their partner’s date of birth and any medical conditions, to be used in paper or electronic form to shop around. It is currently testing this with consumers.
The lobby group is also in talks with the National Association of Pension Funds on whether some form of shopping-around service could be bolted on to occupational schemes to encourage the take-up of Omo in the workplace.
McPhail says: “If a packaged and straightforward solution could be presented to occupational schemes to use on behalf of their members, it would obviously be attractive to them. Some pension schemes are falling well short of desired standards.”
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