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RDR could see fewer people taking open market option

The retail distribution review is likely to see fewer pension savers exercising their open market option, says Fitch Ratings.

In a special report on the RDR, the rating agency says fees for investment advice will drive some people away from the IFA sector.

Senior director for insurance David Prowse says: “Customers will be faced with explicit, direct fees for investment advice, something they may currently perceive to be free because charges are somewhat hidden within premiums. We believe the new transparency will drive some insurance customers away from the IFA sector and towards cheaper, restricted advice or no advice at all and savers may be less likely to exercise their open market option.

“Although most annuities should be easy to compare, some customers may not be aware they can easily look for a better annuity deal themselves without having to consult a financial adviser and pay the charges.”

The Retirement Adviser director of retirement planning Nick Flynn says: “This is a concern. When you think about what the Association of British Insurers is doing with Options, it would be a real shame if the RDR ends up restricting this.”

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