Calls for a reform of the open market option have been made by the TPR.
Guidance has been released to encourage members to search for suitable annuities.
The Pensions Regulator (TPR) has called for a reform of the open market option (OMO) to make it easier for scheme members to make better decisions about their retirement income.
TPR has released new guidance in a publication called Making Your Retirement Choices to encourage members to shop around for annuities. The regulator said trustees and providers “could do more to issue clear calls to action while encouraging members to shop around for the best annuity deal“.
Pensions minister Steve Webb said: “The choices we make at retirement age are amongst the most important of our lives. You don’t have to buy an annuity from your pension scheme provider. Shopping around can provide better value for money and significantly boost retirement incomes”.
He added: “I want to see trustees and providers really encourage members to make good choices”.
However, Tom McPhail, head of pensions research at Hargreaves Lansdown, said the guidance is still not enough and until shopping around becomes a default option, the rate of OMO uptake will not change.
TPR acting chief executive Bill Galvin said: “Members could miss out on higher retirement income because they are not well supported in making good choices. Our research shows that standards of information are mixed. Retirement literature should grab members’ attention, and motivate them to take action, rather than putting people off with jargon and legalese”.
He continued: “While the legislative requirements provide an important safeguard, we want to see trustees and providers delivering simple, readable information that helps members to maximise their retirement income”.