Don’t get me wrong, the body being formed by MGM Advantage, Living Time, Partnership Assurance, LV=, Canada Life and Hargreaves Lansdown will be a force for good and I think the idea of co-ordinated action makes sense. But after all the years of industry talk on the subject of the Omo which has produced so little change in pension savers’ purchasing behaviour, watching Aviva’s ad on the box at home made me feel like the concept’s time may finally have come.
The ad paints a picture of a 60-something bloke looking at buying the Triumph Bonneville he has wanted all his working life, promising up to 10 per cent more if he comes to Aviva. As his wife tells her friend, how she is going to get him to mow the lawn twice a week, our hero is polishing his new iron horse. “When your pension is about to mature, don’t leave it with your pension company – shop around” goes the voiceover, which also directs the viewer towards their financial adviser.
The Aviva ad comes against a backdrop of an ever increasing at-retirement market and will doubtless herald further competition in the future. Just last week Watson Wyatt predicted the UK at-retirement market for financial products will grow by over 60 per cent in the next five years to £23bn, from £14bn at the end of 2008. Most of that money is going into annuities eventually, and consumers should ultimately benefit from a more competitive market.
Making sure a market is efficient is obviously important. Options – the Open Market Pensions Transfer Service – went live last December with the objective of improving pension fund transfer times.
These have been reduced from an average of 31 days in 2007 to single figures today but despite this, take-up of the Omo remains low.
The decumulation process could be decoupled from the accumulation process completely, making the Omo the default position. This drastic step would lead to better outcomes for more consumers but would be too much for ministers to embrace right now.
We are also seeing innova tions from other annuity providers. Legal & General is now offering direct access to impaired life annuities and Standard Life has got its tie-up with Partnership. Postcode deals are becoming more widespread too.
How much of this innovation is rearguard action designed to take the wind out of the sales of the simple shop-around argument is debatable but we will surely see more of it in future.
Reviews of the annuitising procedures, from wake-up letters, to marketing literature via cutting delays all contribute to improving consumer understanding of their options but I believe our biggest hope is that ad campaigns like Aviva’s become the norm.
I understand its current campaign is to run for four weeks initially, with more to come if take-up is good.
IFAs should feel positive about the campaign because it directs the punter towards their financial adviser and, with so much annuity cash up for grabs in the future, such admittedly expensive campaigns will become more viable. More providers doing the same can only be good news for advisers and clients alike.
John Greenwood is editor of Corporate AdviserMoney Marketing