Labour has renewed calls for the Government to create an annuity clearing house to help consumers shop around.
Speaking at a fringe event on workplace pensions at the Labour autumn conference in Manchester this week, shadow pensions minister Gregg McClymont said providers should have to go further than informing people of the open market option.
He said: “We have suggested an independent clearing house for annuities. What the industry used to do was send you a letter when you get to retirement age and say ‘this is your annuity’. The industry has moved a little and now has the open market option so providers have to say ‘you can shop around’ but I think we have to go further because annuities are so important. It is a work in progress.”
The idea was first floated by Centre of Policy Studies research fellow Michael Johnson in a paper in February. His study suggested £1bn is being lost by customers on the wrong annuities.
Under Johnson’s proposals, a standard form would be sent to the clearing house, via the pension pot administrator, around three months from retirement detailing any health issues and the type of annuity required.
Providers would then bid for annuity business on a daily basis.