Chief executive Tim Jones recently told Money Marketing that Pada is considering making the open market option the default for the decumulation of personal accounts.
The authority proposed setting up a panel of providers to supply annuities to retiring investors in a consultation document launched in December but Pada’s thinking seems to have moved on, which has come as a relief to many.
Jones said: “Before we got into this consultation, I thought that what one might call automatic Omos were insufficiently developed to be a credible alternative to a provider panel.
“We have now had people suggest we might be able to get our problems solved through an electronic Omo and not need a provider panel and I think that is definitely worth further investigation. We are not hung up on a provider panel, what we are trying to do is fix a problem.”
The implications of Pada choosing a whole of market solution would be far-reaching, according to experts.
This is because personal accounts will set a benchmark and, if Pada chooses the Omo, that benchmark will be significantly higher than where many conventional providers currently sit.
Insurance companies continue to enjoy a large chunk of their pension customers rolling over into their annuities even if there is a far better rate on the open market.
Last year the number of people using the Omo actually decreased to 37 per cent from 39 per cent in 2007 which some have put down to the nightmare delays many customers are experiencing when transferring their pension funds.
Hargreaves Lansdown pensions analyst Nigel Callaghan says: “This would be a great development and would help drag pension companies kicking and screaming to the Omo table.
“Personal accounts is predicted to have seven million members. This would be such a huge investor shift that insurers would have to sharpen up their acts.”
But we will have to wait and see whether Pada changes tack. Go boldly Tim. Then providers will be forced to keep up with the Jones’ (sorry) and customers will have a better retirement.
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