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W&P select committee calls for mandatory Omo

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The Work and Pensions select committee wants the Government to force all pension providers to show customers annuity rates from across the market when they reach retirement.

Annuities have come under scrutiny this year after the FSA announced plans to conduct a thematic review of the market in January.

The Association of British Insurers has already taken steps to increase the number of people who shop around when they reach retirement, launching a compulsory shopping around code of conduct for its members and forcing all providers to publish their annuity rates.

A report published by the select committee last week urges policymakers to go a step further by mandating that insurers provide annuity customers with a breakdown of rates from across the market.

The report says: “We recommend that the Government and regulators institute a mandatory system whereby, when consumers come to purchase an annuity, their pension provider is required to supply them with a comprehensive breakdown of all the different annuity rates available to them from different providers, including options and rates for enhanced and impaired life annuities.

“We also recommend that, as a last resort, the Government considers taking steps to separate the function of providing pension schemes from that of providing annuities.”

Better Retirement Group director Bill Burrows says: “I think the Government should give the ABI’s code a chance to succeed before making any intervention.”

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  1. Julian Stevens 2nd May 2013 at 9:54 am

    Just providing prospective retirees with masses more information is not the solution to the problem.

    The default option should be to urge such people to seek independent/WoM advice not just on the best annuity rate but on the best type of annuity plus all the other retirement income options. No annuities at all should be quoted. Prospective retirees should be told nothing more than: Here’s the expected value of your pension fund, you should now seek independent advice on how best to deploy it in conjunction with all and any pension funds you may have.

    And anyone who, as a result, goes to the MAS should be told: This service is free to you because it’s funded by IFA’s. Go seek one out for the best deal.

    Why aren’t these things already standard practice?

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