The Government will consider taking legislative action if the insurance industry fails to make the open market option operate more effectively.
The statement of intent, contained within the Treasury consultation on removing the requirement to annuitise by age 75, is further evidence of a hardened stance from policymakers.
The consultations says: “The Government is keen to ensure that more people get the best annuity rate by taking advantage of the open market option. Officials will continue to work with the insurance industry to establish how the Omo can be improved and its uptake increased. If it is not possible to make the Omo operate more effectively, the Government will consider legislative options.”
In August, Treasury financial secretary Mark Hoban told the industry to explain why so few people are currently accessing the Omo. An internal email from the Association of British Insurers to its members stressed Government had a “serious appetite” for wholesale reform.
More recently, the Government and The Pensions Regulator said trustees and providers “could do more to issue clear calls to action while encouraging members to shop around for the best annuity deal”.
The Pension Income Choice Association has been campaigning for the Omo to be made the default option for savers. Pica chairman and Hargreaves Lansdown head of pensions research Tom McPhail (pictured) says: “The Government is clearly intent on driving the industry to up its game on assisting consumers in shopping around for retirement income.”
The latest ABI research suggests 67 per cent of people buying an annuity currently shop around. However, McPhail says only 32 per cent of consumers purchased away from their existing provider.