The research says 41 per cent of pension funds are worth under £10,000. Bayliss says this implies that nearly half of people only have this amount to annuitise but a significant number have more than one pension fund which, if merged, could be eligible for a substantially better rate. Annuity Direct research shows that people who use the Omo have an average of nearly 2.5 funds.
He criticises the ABI for ignoring impaired annuities. Research from Hargreaves Lansdown shows that 40 per cent of people may be eligible for an enhanced annuity but Bayliss say this would have “blown a hole in the ABI’s argument”.
Only 23 of the ABI’s 36 members took part in the research, which skews the findings, says Bayliss. He says Annuity Direct’s clients see an average improvement of nearly 10 per cent but the ABI research says 85 per cent of people with funds of £10,000 or below are within 5 per cent of the best rate. He says the difference is likely to be due to the 13 members that did not participate and non-members, which he says are often the “worst offenders”.
Bayliss also hits out at the ABI for implying that people with small pension pots will only be slightly worse off by not shopping around. The ABI’s research points out that for an annuity fund under £10,000, the average person would only miss out on £530 by not exercising their Omo but Bayliss says this is “extremely patronising”.
He says: “The ABI’s line is the status quo is fine and everything about its research is convenient to this story. Its evidence and research spins to support its argument. Its work is poor.”
ABI spokesman Jon French says: “We made the scope of the research very clear. It did not look at certain things because it was not designed to. We wanted to widen the debate on annuities and highlight the work the ABI and the industry has been doing to improve things.”