Government and the Pensions Regulator have thrown their weight behind reform of the open market option amid concern schemes and providers are failing to effectively communicate basic information on shopping around to members.
In a statement issued today, the regulator says trustees and providers “could do more to issue clear calls to action while encouraging members to shop around for the best annuity deal”.
It claims that, despite disclosure requirements mandating basic information is provided on investment options six months before retirement, standards remain “mixed”.
Pensions minister Steve Webb (pictured) says: “The choices we make at retirement age are amongst the most important of our lives. You don’t have to buy an annuity from your pension scheme provider. Shopping around can provide better value for money and significantly boost retirement incomes.
“I want to see trustees and providers really encourage members to make good choices.”
The regulator says exercising the omo could add “upwards of 17 per cent” to a member’s retirement income, while accessing an enhanced annuity could increase income by more than a third.
The Pensions Regulator acting chief executive Bill Galvin says: “Members could miss out on higher retirement income because they are not well supported in making good choices. Our research shows that standards of information are mixed. Retirement literature should grab members’ attention, and motivate them to take action, rather than putting people off with jargon and legalese.
“While the legislative requirements provide an important safeguard, we want to see trustees and providers delivering simple, readable information that helps members to maximise their retirement income.”