It is approximately six years since the FSA (Financial Services Authority) made it obligatory for insurers to tell people that they had the right to do what is called ‘exercise their open market option’ and that is just a posh term for ’shop around’.
However, despite the insurers telling people this – in not too forceful a manner, of course, and usually buried in the middle of mounds of literature in tiny small print – apparently two thirds of people do not bother to look for a better deal.
It is actually possible, believe it or not, to increase your retirement income from an annuity by over 40 percent just by dong a little research. This is one of the most important decisions of your life, so why aren’t people spending a little time on it?
Hargreaves Lansdown’s pensions analyst, Nigel Callaghan, says:
“The current system isn’t working. Pension companies, typically insurers, continue to sell poor value annuities to those who have saved with them for years. Rather than rewarding their loyalty with a competitively priced annuity, they seek simply to swell their bottom-line profit. It’s a scandal. Commercial greed is being put before the best interests of consumers”
Callaghan’s personal opinion is that the open market option should be the default and people should have to opt out if they wish to buy the annuity automatically offered by their pension company. Callaghan is not the only one to believe that regulatory intervention is required and other experts have started to voice their own opinions on the matter, so maybe we will see a few changes in the industry over the next few years.
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