Head of Pensions Policy

At the risk of sounding like a broken record, let me reiterate the facts. 50% (half) of all Standard Life customers have purchase prices below £10,000. Of those, around half (25% of all people facing the retirement decision) cannot exercise the open market option because their purchase prices is too low (sub £5K). In other words, no other players in the market (including Just Retirement) will take their transfer value. The other half of this group (sub £10K) can shop around but with very limited choice. Where SL is not the best quote on the market (which it is in many cases), a competitor can typically only offer £1 a month more income. Another 10% of all customers reaching retirement buy drawdown. The remaining 40% exercise the Open Market Option. I have no reason to believe that SL's experience is any different from any of the other major pension providers. When I went to school, 50% plus 10% plus 40% equalled 100%. Where exactly are these new shopper arounders going to come from? The only way to increase the 40% of OMOs is to look at the £5K to £10K purchase price market. If a revolution (OMO in the £5K to £10K market to achieve another £1 of income) is to be driven by advisers, then are they prepared to do all this work for £150 or less? That OMO case averages are higher hardly comes as a surpise - £600 (1.5% of £40K) is nearer the mark for allowing an adviser to transact this business profitably. As for wake-up packs, ABI has been doing some sterling work with the Options service to make exercising the OMO easier. They have also done some in-depth consumer research looking at the effectiveness of wake-up packs, the messages from which will be translated into guidance for providers to use in making their wake-up packs more effective. On the subject of good communication, I can find no reference to the minimum purchase price in the Just Retirement Lifetime Income Plan KFD. Yours in exasperation, John

Posted by: John Lawson