The industry should stop debating on making the Open Market Option compulsory and should suggest ways to improve choice, said the Pension Income Choice Association (Pica).
Insurers must accept that improvements are required to ensure pensioners get a better deal, the lobby group said in a statement.
“Something has to be done because far too many people are losing out. This includes those who fail to secure the best rate on a standard annuity and, more worryingly, those who do not investigate their enhanced annuity options”, the statement from Pica read.
“It is clear that the majority in the industry now realise improvements have to be made and that change will require new legislation. Voluntary action taken so far does not seem to be working and the big providers are not coming up with many ideas of their own”, it added.
Making the OMO compulsory and imposing it on people will not solve the problem, the group said adding: “What we need is a truly informed shopping around process where the buyer has the power and the provider has to compete to win the business”.
Not everybody avails OMO, Pica said adding: “Too many pensioners fail to engage with OMO and we believe many of those that do may still be losing out by taking conventional plans. Our suggestion is to improve the wake-up information that retiring workers receive to remove any bias and introducing a pension passport that gives them the details at their fingertips that they will need when shopping around and making decisions”.
The suggested changes will benefit people with smaller pot also and will not force people to act, it said. The objective is to ensure that shopping around becomes easier as it is for customers to stick with current providers.
Pica’s suggestion comes after the Phoenix Group and Legal & General protested against making OMO the default or compulsory option.
Pica was set up in 2009 and the lobby group campaigns for greater awareness of retirement option on behalf of IFAs and pension providers. It counts IFAs, employee benefits consultants in the annuities and retirement market, and product providers as members and is urging the government to replace the current system with a three-step pensions passport process.