The group argues the default option for those approaching retirement should be for them to review all the alternatives available to them rather than being automatically switched into a poor value annuity.
Pica, which was set up in July this year, is lobbying for change and awareness around the open market option.
In a report launched today at the House of Lords called Optimising Value in Retirement, Pica is calling for a new three-stage communication process that pension providers should follow instead of the existing process:
- To focus on the choices and decision people face at retirement and the action they need to take.
- The production of a personalised statement containing sufficient information for people to use to obtain quotations.
- A short communication requiring the employee to inform the company/ trustees how the fund should be applied.
It is also suggesting new initiatives are needed to help IFAs deal with smaller pension pots as in 2008, 88 per cent of all annuities were purchased with funds under £50,000.
Further recommendations in the report include a more active role for employers in advising their staff on how to go about purchasing an annuity and more direct-to-consumer price comparison facilities including the expansion of the FSA’s tables to include all providers and all retirement income solutions.
Pica chairman and Hargreaves Lansdown head of pensions research Tom McPhail says:“Given the increasing level of competition in the market it is critical that people review their options at retirement and have the opportunity to choose the right product and provider. In 2008 just over a third of those taking an annuity exercised their right to purchase it on the open market.
“We believe that our recommendations would give hundreds of thousands of people over the next ten years a greater level of income in retirement. But we understand that further initiatives will need to be supported to make this a reality, such as making sure those with smaller pension pots have access to financial advice.”
Pica’s management group includes Aegon, Living Time, LV=, MGM Advantage, Partnership and Bluefin.