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Topics: NAPF| Tom McPhail| Annuities| open market option| ABI
The National Association of Pension Funds (NAPF) has proposed a nationalised brokerage system to help retirees get the best annuity rate and reform the current “toxic system”.
It said the government should monitor the success of the open market option (OMO) more closely, as the "unfair" way most annuities are currently sold is wiping up to £1bn off retirees' future income.
The NAPF said if take-up of the OMO does not improve, the government should intervene with a national system.
With auto-enrolment due to begin this year, the number of people receiving sub-standard annuities could triple, the NAPF warned.
The organisation blamed the OMO failure on a lack of financial advice for small pot holders, a lack of financial literacy amongst retirees, and a lack of support from employers for staff.
It also accused insurers of "murky" pricing structures and failing to signpost the OMO properly.
The NAPF proposed that shopping around should be compulsory and automatic on retirement.
It said the government, the Financial Services Authority (FSA) and the Association of British Insurers (ABI) should drive transparency in annuity pricing, commission and retention business through better disclosure.
Joanne Segars, chief executive of the NAPF, said: "The annuity market desperately needs to be straightened out.
"People are saving throughout their working lives only to end up short-changed by a toxic system."
In December, the ABI launched a consultation on creating a new code of conduct for insurers to reform the way in which it presents the OMO to retirees.
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Pension Expoitation
Privete pension holders have been explouited for years by setup charges and annual charges.We have payed these companys for years for there services to invest our money.When we come to retire we are compeled to hand over our pension pot to an annuity provider at a derisory rate that is locked in for life.THIS IS NOT THERE MONEY OR GOVERNMENTS MONEY AND WE SHOULD NOT BE DICTATED TO AND ALOUD HOW WE INVEST OUR OWN MONEY TO GET A GOOD RETURN IN OUR RETIRMENT.
Posted by: Paul Glover
Time for action
The government needs to take the bull by the horns and enforce the OMO by banning pension companies from offering their annuities at all. Then, when retirement hits, the pensioners should be informed of their pension pot amounts and told to go to an adviser. The affordability issue could be addressed by giving each retiree a government-paid voucher entitling them to a full advice session at the standard rate calculated by the ABI. Given the money that is lost, this would pay for itself in the long run.
Posted by: Tom Murray
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Unbelievable...
"with auto-enrolment due to begin this year, the number of people receiving sub-standard annuities could triple, the NAPF warned" - really. Then perhaps yopu should be doing something about that instead! Everything in this article points to a lack of advice along the pension timeline to the date of the retirement poy being taken, yet RDR will only make this worse.
Posted by: Fivepoles