Amidst the reality of dismal annuity rates and increasing financial pressures on retirees, the government has asked the ABI why so many pensioners are failing to get the best deal on their annuity by using the OMO. Mark Hoban who is the financial secretary to the Treasury is rumoured to have asked the Association of British Insurers (ABI) why so few annuitants are using the open market option (OMO) to compare annuity quotes.
This process is essential in securing the best annuity quote. However despite extensive efforts by insurers to improve the information given the would-be annuitants, only 40% of those who bought an annuity this year used the OMO. This means that many of these retirees will miss out on a potentially higher retirement income as they have taken the first offer given to them from their current pension provider.
In a statement to The Herald newspaper the ABI said that… “…the ABI and its members are committed to making the process of shopping round for an annuity as straightforward as possible.” Some have questioned why the ABI would allow this situation to continue given the fact that it can have such an adverse effect on a retiree’s income. David Trenner from Intelligent Pensions, said that…”…the ABI is a trade body so it can hardly turn round to the likes of companies such as Scottish Widows or Friends Provident and tell them what to do.” Some have argued that the only way to enforce use of the open market option would be to make it the default for those looking for an annuity, in essence this would mean that savers would be compelled to seek alternative annuity quotes.
