Hargreaves Lansdown head of pension research Tom McPhail told Money Marketing last week this was “the only acceptable solution” after the FSA attacked life offices’ poor consumer correspondence on annuities.
Half of Standard Life cases involve pension pots of under £10,000 and 28 per cent are under £5,000 but there are very few products available on the open market for funds of this size. Lawson says many advisers avoid these cases because they are not commercially viable.
Standard Life and Legal & General are the only providers offering annuities for pots of under £5,000.
For funds under £10,000, only Standard, L&G, Aegon Scottish Equitable, Scottish Widows and Axa offer products.
Lawson says another 15 per cent of people choose to take drawdown, leaving only around 35 per cent for whom exercising their Omo is possible.
He says: “Hargreaves Lansdown is constantly bleating on about how more people should be exercising their Omo but I believe the majority of people who can already do. Unless more annuity providers reduce their limit to below £5,000 and more advisers take interest in smaller funds, I do not think there is much of a market beyond what is already there.”
McPhail says: “We want to push a step-change in demand to speed up the market’s progress. We take on any fund size and think increased demand would see more brokers doing this.”