Living Time Business development director Peter Quinton has warned that the retail distribution review may run contrary to the aims of the Government’s Open Market Option review. He believe that FSA plans for a simplified advice channel risk reducing consumers’ options further.
He has warned that people already often have limited access to proper advice – a combination of low commissions and the reluctance of many retirees to pay fees. He says that this often means that people are ushered towards self-select, tied or multi-tied default option of lifetime annuities or are simply left with their existing provider.
He says: “The RDR proposals assume some advice is better than none when what these people desperately need is independent advice on the whole range of options on probably the biggest single investment they will make. A key aim of the OMO must be to solve the problem that those who need to make the best use of every penny of pension saving currently get the least help.”
As part of OMO, Quinton believes that providers should be forced to transfer funds within 14 days.
He also wants to see providers’ forms standardised and argues that some forms are still encouraging roll over athough they manage to comply with current OMO rules.
He says: “Many of the letters I have seen do comply with OMO rules but still encourage pension clients to roll over into an annuity instead of shopping around. These forms should highlight the fact that advice and alternative products are available which may offer better better value.
Quinton also believes that such as system would better promote fixed term annuities which he argues would offer lower costs and a guaranteed income and maturity amount.
He says: “Fixed term annuities effectively offer an OMO at the end of each term, forcing the holder to shop around to make the best choice depending on their individual circumstances at that time.”