Insurers are preparing to go into battle with the Pension Income Choice Association over proposals to make shopping around for an annuity the default option for savers.
Last week, the Association of British Insurers set out plans to remove the annuity application pack from communications sent to clients.
The ABI says the reform will put an end to inertia selling and pledges to pursue further improvements to the current system to make shopping around the “default behaviour” for investors.
But ABI members have privately indicated that the change represents a line in the sand in reform negotiations.
Standard Life head of pensions policy John Lawson says the industry has already improved shopping around rates significantly.
He says: “The level of shopping around is enormous. We have improved the process immeasurably over the last three or four years. I do not think it is clear what a compulsory Omo looks like.
How long do we have to wait before we can speak to our own customer while companies like Hargreaves Lansdown and Rockingham Retirement try to get their hands on that customer? It will be a difficult situation if the Government tries to bring in legislation saying a provider cannot speak to its own customers.”
Hargreaves Lansdown head of pensions research and Pica chairman Tom McPhail says: “I do not buy insurers’ arguments against making shopping around the default and I do not think they believe their arguments either.
“It is commercial cynicism. Ultimately, if they will not play ball and improve the process so shopping around becomes the default then the Government will have to legislate to push them to do it.”