Rational, but ill-informed

Unforutnately, I think Andy has missed the point. If he found out that he could buy an identical car from another manufacturer for thousands of pounds less, would he really have purchased the same model? The difference with the annuity market is that customers do not know that other manufacturers sell exactly the same product, who they are, how to get a quote (or a test drive) or that they could save thousands of pounds! Are customers making rational decisions or ill-informed decisions? It's difficult to argue that the decisions are informed when the awareness of enhanced annuities is still so low.

Posted by: Matt Trott

Open Market Option

The open market option is virtually worthless when the company you have saved with charges you thousands if you exercise it. Has anyone ever challenged this practice?

Posted by: David Jackson

Mis-placed loyalty

Following John Lawson's article for MM last week, here is another provider pitching the ABI's misleading tale! As Matt rightly says Andy has missed the point. Scottish Widows' and Axa policyholders happily trust the company that has invested their money to provide them income, and they typically get 15% less as a result. Since the best rates are usually from the likes of the Pru, Aviva, L&G, Standard and Canada Life, the issues of security, service and reliability should not arise. "It was comfortable and had all the features I was looking for. The dealer had a good reputation, and was consistently polite and prompt. So I chose to buy from them again." Andy, you had a car before and you have a car now. Policyholders go from having a savings plan with tax advantages to having a plan paying guaranteed income for the rest of their lives. If when you retire you decide to buy a mobile home will it be the same as the car you are presently driving??!! And will you buy from that nice man that sold you your first ever car when you were a young boy??! If no-one tells you that you could have done much better of course you are happy with the annuity you have purchased, but how do you feel when you find that your misplaced loyalty could cost you hundreds of pounds every year for as long as 30 or even 40 years??

Posted by: David Trenner, Technical Director Intelligent Pensions

Ambition not mediocrity

Mr Trenner and Mr Trott talk lots of sense. The (One) Market Option only enables customers to purchase a lifetime annuity, or follow Andy Miller’s theme an “uninteresting estate” – it does not enable customers to access the 10 choices in retirement, or the alternative ways or getting from A to B. So if you like saloons, or 4 wheel drives, or motorbikes, or sports cars then you can’t access one with the OMO. Maybe we should stop the car analogies because I’m not really sure of the relevance. Customers are currently missing out on £3Bn of additional retirement income according to the independent research undertaken by Oxford Economics (December 2009) by not shopping around. That for me is the more important fact. Let’s just accept the market if not efficient and that accepting mediocrity is a poor trait – I for one am not accepting it – lets replace complacency with an ambition to achieve a better outcome for consumers, advisers and respect for the industry.

Posted by: Steve Lowe

Why pensions are like cars

Funnily enough Steve, I often use cars as an analogy when I discuss pensions with scheme members. It seems to work very well and you can often see the 'lightbulb' go on when you explain something in terms most people can understand. Might not work for everyone, but it works for me. See: http://www.mycompanypension.co.uk/Why-pensions-are-like-cars

Posted by: Mike Jones

Did any of you actually read the article?

I don't think it's the author of the article who has missed the point here. The question the article poses is why some people look at other annuity rates being offered and then stick with their original provider. That's the "test drive" referred to in the title. The comments left above have all been in relation to whether people are aware of their OMO, but the author quotes research that indicates that they are (whether or not you believe the research is a separate matter). As David points out, the author works for a provider offering competitive annuity rates, so why would he be opposed to people exercising the OMO? Strange comments.

Posted by: lorraine mckean