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Open season to bring fair play to annuities

Over the last year or so a huge amount of industry debate, especially in these pages, has been devoted to highlighting the open market option.

But we have only just started in terms of what needs to be done.

A combination of Government and FSA heavy prodding and adviser pressure has seen providers move some way forward through the ABI’s Options initiative to improve transfer times, although take-up by some has been slow.

The ABI is working with HM Revenue & Customs in an attempt to reduce the current bureaucracy involved in the process which will hopefully help.

But much more work is needed. For a start, the target for Options of reducing transfer times must continue to fall. Recent ABI figures show a slight drop in the number of people using their Omo in 2008 compared with 2007 despite a rise in annuity purchases.

The providers which are not yet involved in Options should have to explain their delay to the FSA.

Debate must also continue regarding the single-tie annuity deals that many providers have set up, which leading advisers have warned often offer bad value to consumers and damage the progress that has been made on the Omo.

As well as calls for faster transfer times and better service from providers, the industry needs to think about the innovation and reforms required to the advice system to support a big increase in the Omo.

Currently, in many cases, it may not make economic sense from the point of view of the adviser or client for advice to be given regarding smaller pension pots, although a number of companies have come up with potential solutions.

Living Time’s Offer More Options campaign, first launched last summer, touches on many of the right areas.

The firm is calling for a reform of the advice system to promote wider choice and better engagement with consumers to give them a greater understanding of these choices.

The company is calling on the Government to help matters by offering tax relief for employers offering professional “at-retirement” advice to staff, a proposal that appears to have a great deal of merit.

There is no doubt the at-retirement market will be a huge growth area for advisers in the future. It is vital that the right steps are taken now to ensure clients are offered the best service possible.

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