Last week, Money Marketing broke the news that the group, as yet unnamed, is being set up and is developing a manifesto to challenge industry and political thinking.
The seven firms make up the management board of the body. A wider group of providers, adviser firms and consumer groups will be invited to join an advisory board, which will contribute to the group’s work. The body will be funded by its membership.
Hargreaves Lansdown head of pensions research Tom McPhail is acting chairman, with a permanent, independent chairman to be appointed.
McPhail says: “At the moment, about a third of the marketplace are genuinely using the Omo but a substantial number of people are not shopping around and are making what appear to be inappropriate decisions at retirement.
“Those are the issues we are trying to address. A range of different bodies are aware that the problem exists and yet we seem to be dead in the water. The change in consumer beha- viour is not happening.”
Retirees are losing around £2bn a year by failing to choose the most efficient retirement option, according to Hargreaves Lansdown research.
Living Time marketing director Steve Lowe says the group wants to make more people stop and think before taking their retirement income.
He says: “What we are trying to do is separate out two sta- ges of retirement. We want to separate out the part where people save for retirement and then the part where people choose how to take their retirement income. We talk about stopping, looking around, taking advice and making a positive choice.”
The body believes that, with personal accounts looming, the demise of final-salary schemes accelerating, baby boom-ers coming to retirement and a general election looming, now is the perfect time to shine some much needed light on the issue.
McPhail says advisers stand to gain if the body achieves its goals. He says: “Too many people are making poor decisions at retirement and the majority are not receiving the benefit of financial advice.
“It is a fair assumption that advisers have a key role to play in the resolution of this issue, that whatever outcomes occur, getting more people to make greater use of the services that advisers have to offer will be a key component of the solution to this problem.
“If we have 100 per cent of people shopping around, a lot of them will be seeking financial advice so this should be good news for IFAs.”
The management group will meet every couple of weeks as they develop the manifesto, which will be consulted on by the advisory group in August. They will be lobbying to influence political policies.
One of the issues that the group will aim to change is the way the open market option is presented to people in the run- up to retirement.
McPhail says: “I think that a relatively small intervention at that point could make quite a substantial difference to consumers’ behaviour. We need to push them towards exercising choice.
“At the moment, it is far too easy for them to buy a conventional annuity from their existing provider but a relatively small change in how the information is presented by mak- ing the Omo the default, that can work.”
The group is trying to find a way to semi-automate the decision-making process, with a greater emphasis on online technology.
McPhail says: “It is going to be difficult for people with small funds to pay for full advice but that does not mean the industry cannot provide appropriate solutions and better solutions than the ones they are ending up with.”