The Government has entered detailed discussions with pensions industry representatives over making the open market option the default for investors.
Representatives from the Treasury and the Department for Work and Pensions met with the Pension Income Choice Association and the Association of British Insurers last week to explore the practicalities of legislative change.
Pica chairman and Hargreaves Lansdown head of pensions research Tom McPhail met with Government officials to discuss ways to improve shopping around at retirement. He says: “Policymakers are receptive to the idea of making the Omo the default but they want to be reassured that if we do go down that road it will work. We are discussing the practicalities of how we communicate with people, what do we do if they do not respond and whether we need to look again at small pots.”
The ABI published a best practice guide in January, saying providers would do more to encourage customers to shop around for an annuity. This followed a warning from the Government in December that it would “consider legislative options” if insurers failed to improve takeup of the Omo.
In November, the Government and the Pensions Regulator issued a joint statement outlining concerns about the quality of member communication. This followed an ABI warning that Government ministers had cranked up the pressure on providers over the issue.
An ABI spokeswoman says: “The Omo review working group is discussing the practicalities of making the Omo the default alongside everything else.”