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MM Leader: Omo so near and yet so far

The ABI’s new mandatory code of conduct around the open market option is a step in the right direction but more needs to be done to ensure consumers make the most of their pension pots.

The code, due to be introduced early next year, will force providers to remove the annuity application form from communications sent to policyholders and so stop savings being automatically rolled over into the same provider’s annuity.

Removing this inertia should help matters but insurers will still be able to provide their own quotes, which many are likely to accept without shopping around.

It would be concerning if ABI members saw this move as the endgame rather than another step along the road to improving consumers’ retirement options.

The trade body has come under significant media and political pressure over the Omo. With certain members having a great deal to lose from consumers exercising their right to shop around, the ABI is still failing to be as progressive as it needs to be.

A cross-industry Omo working group should report its findings to the Government by the end of the year and is likely to suggest much more radical reform than the unilateral proposal set out by the ABI this week.

Politicians should welcome this code but continue to press for further improvements to ensure people arrive at the best retirement solutions achievable to them.

Raw deal

News that pressure group Justice in Financial Services is looking to judicially review the way the FSA has acted in organising its £54m Arch cru compensation package again highlights the raw deal investors are being offered.

In its role as authorised corporate director of the fund range, the assets should have been the responsibility of Capita. Alongside distributions already made and the remaining assets, the package should see investors receive 70 per cent of their funds compared to when the range was suspended in March 2009.

Arch cru investors were entitled to much higher levels of protection from the FSA and Capita than they received. At a time when we are trying to improve confidence in financial services, they also deserve much higher levels of compensation than has been put on the table through this compensation package.

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. I am totally in favour of pensioners being given ample opportunity and a gentle ‘shove’ to shop around.

    It might be that in the future the pension provider has to include a form which has to be signed by the potential annuitant that they understand that a better annuity rate might be available elsewhere but wish to continue with purchase from the pension provider anyway.

    The fact is that a few pennies more from an alternative provider may seem worth pursuing, but in doing so the pensioner finishes up losing 2 months annuity payments waiting for the transfer process to complete. This could equate to 1% of the total of all annuity payments which are likely to be paid so unless the alternative provider is paying at least 1% more the pensioner will actually finish up out of pocket. Then there’s the aggravation ! Has the ABI or the FSA ever tried to deal with Aviva’s admin ?

  2. It’s amazing to me that there is such furore from the various quangos about OMO when it is such an insignificant issue compared with the massive, criminal unfairness of the way in which State pensions are awarded.

    Pay 49 years of NI contributions, pay taxes for 49 years (many of those years with tax claculated at 40%) and be awarded £102 per week State pension

    or

    Come into this country from abroad, never do a days work, rely on the State to bring up a brood of kids, have them educated and innoculated at the expense of the British tax payer, be given a home to live in rent free, and get the same pension as above.

    This isn’t racist – it’s the way of modern Britain.

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