The FSA has probed providers’ wake-up packs and the Association of British Insurers’ Options initiative has sped up the transfer of funds in many cases. The Pensions Regulator and the NAPF have also dabbled in this area.
But the issue of getting consumers to exercise choice to get the most retirement income from their pension savings is still “dead in the water”, according to a new industry group which will champion more retirement choices.
MGM Advantage, Living Time, Partnership Assurance, LV=, Canada Life, Hargreaves Lansdown and Bluefin have joined forces to form the new body to lobby for change.
So what impact will this have?
MM broke the news that the group was being set up on Wednesday. It is yet unnamed and is developing a manifesto that aims to turn the status quo on its head.
The seven firms listed above make up the management board of the group and 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 still being finalised.
McPhail says: “If you look at where we are at the moment, about a third of the market place is genuinely using the Omo and 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 do seem to be dead in the water. The change in consumer behaviour is not happening.”
The group’s timing seems apt, what with personal accounts looming, the demise of final salary schemes accelerating, baby boomers descending on retirement in their droves and therefore decumulation and an impending general election which means the policymakers’ ears are open.
And the potential win for consumers is massive as retirees are losing a collective £2bn a year from not using their pension funds efficiently, according to Hargreaves Lansdown research.
McPhail adds that advisers also stand to gain if the body achieves its goals.
He says: “Too many people are making poor decisions at retirement and an awful lot of those people, 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.”
So far MM users seem to be backing the group. Do you think a body like this is needed? Or are the ABI and the regulator doing enough to help consumers here?
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