We remain disappointed at the level of take-up of the open market option from pension schemes and the scandalous loss of income this represents.
In many cases, failure to take up the open-market option will effectively negate any benefit gained from the selection of a good provider for the pension savings prior to retirement.
Figures produced earlier this year showed that the difference between the best with-profits pension performance and merely average performance would be wiped out by a failure to fully investigate the open market option if the individual were to qualify for an enhancement.
Any fund manager who consistently adds 2.5 per cent a year return above their peer group would be well known to every adviser and yet the open market option can yield a better result.
Put in a more positive fashion, selection of the best provider pre-retirement and the best annuity post-retirement could add almost 80 per cent to the individual’s income for the rest of their life.
Despite activity from the FSA and the Association of British Insurers and years of campaigning, the number of people shopping around for the best income remains well below 40 per cent and it is time for the industry to act decisively to improve matters. The wake-up letter issued to customers with maturing pension policies is too long and detailed to encourage people to action to improve their situation.
The ABI standard now includes health questions but it is debatable whether the long letter will be read and digested by more than a small proportion of those receiving them.
It surely cannot be beyond the wit of this great industry to come up with communications that are informative and sufficiently stimulating to generate some movement on the part of clients.
If we do not do this, how long before someone complains that we simply do not want people to get the best income in retirement?
We all should be striving to ensure that everyone
considering retirement is made fully aware of their options, not only those reaching their selected retirement age. We should be providing them with simple and clear guidance on where to go for advice and we should be supporting and remunerating those who are in the best position to give this advice.
Naturally, Just Retirement stands to benefit from an improvement in the position but we should not lose sight of the fact that a failure to address this issue will reflect badly on the whole industry.
In an era when treating customers fairly is, quite rightly, top of everyone’s mind, it is inexcusable that we miss this opportunity to do just that by making sure everyone shops around.