The calls for change to the existing Open Market Option system have received a boost with Tory MP Harriet Baldwin backing the case for reform by scheduling an amendment to the Pensions Bill.
The Open Market Option allows pension savers to shop around for their Annuity, potentially getting a much better income than if they were to buy an Annuity from their existing pension provider.
However, not everyone does use a pension Annuity calculator to shop around for the best Annuity or indeed check whether they qualify for an Enhanced Annuity. Some experts believe that because the existing pension providers are allowed to include illustrations and application forms for their Annuity offering it acts as a disincentive for people to shop around, which in turn often leads to a lower income.
The campaign for Annuity reform has slowly been gathering momentum and the offer which Harriet Baldwin (right) has made to Tom McPhail, chairman of the Pension Income Choices Association (PICA) is to be welcomed.
PICA want shopping around for an Annuity to be the default option at retirement, and Baldwin said: “It is an interesting topic that he has raised and putting an amendment into the bill is one of the techniques that can be used to raise an issue.”
She continued: “I want to ensure my constituents are receiving as good a retirement income as possible and if they are missing out because they are not shopping around that would be a shame for them.”
It is unlikely that the amendment will make the final bill, however it is hoped that raising the issue will put it firmly on the agenda of MP’s.
The Association of British Insurers (ABI) last month signalled that its members would no longer be able to put application forms in the retirement packs sent to members. However many believe this does not go far enough, indeed Mr McPhail called this offer a “fudge” as Annuity quotes could still be included.