AEGON comments on today’s Open Market Option update

HMT has today published its update on the review of the Open Market Option (OMO) http://www.hm-treasury.gov.uk/tax_workwel_index.htm. In the update HMT recognises the work carried out by the pensions industry and regulators over the last year to improve customers’ experience of using the Open Market Open.

HMT says it will continue to monitor progress of the operation of the OMO and will be using key success criteria, a ‘basket of indicators’, to continue to measure progress. Successful outcomes will be that:

people coming up to retirement understand the importance of choosing the right annuity and shopping around for the best rate
the process of shopping around and switching providers is as quick and simple as possible.
The Government believes the changes made so far will deliver real improvements in outcomes for people approaching retirement and will help them to make informed decisions. However, it recognises there are still improvements to be made to help customers to choose not only their annuity provider, but also the type of annuity they take.

Rachel Vahey, head of pensions development, says:

“We welcome the HMT’s update on the review of the open market option. When buying an annuity you have to get the decision right first time. That means not only looking for the best rate but perhaps more importantly the best type of annuity to suit people’s circumstances. The pensions industry has made significant progress this year both in committing to raise awareness of the benefits of shopping around for the best annuity and in making pension transfers faster and simpler. We’re pleased the Government recognises this.

“There’s still more work to be done to increase awareness of the open market option and reduce transfer times and we will continue to work with the Government, through the ABI, on this. While it’s easy to measure progress on transfer times it’s important to remember that increased OMO awareness won’t lead to a proportionate increase in OMO take up as not everyone will be better off shopping around.”

“We also recognise there is more to do to help customers understand their retirement options, such as whether they should make provision for a spouse or dependant or buy an increasing or level annuity. What is right for one person isn’t necessarily right for another. We are working closely with the ABI to develop a basket of indicators for the Government to measure progress of customers’ understanding to help them to make the right annuity choices”.

In last year’s Pre-Budget Report HMT set out its action plan on how to improve take up and awareness of the open market option. Its recommendations included

Asking the Pensions Advisory Service to design an web-based system to help people make decisions on annuity purchase
FSA investigating provider communications in the run up to retirement – the so-called ‘wake up’ letters

FSA investigating the time taken for providers to transfer money when someone exercises the open market option

HMT establishing how it will report on progress using a basket of indicators
The Treasury has published today an update on the review of the Open Market Option. The update recognises:

The Pensions Advisory Service annuity shape web-tool launched in May 2008.
The joint working group set up by DWP and HMT and consisting of representatives from the Government, regulators, consumer group and pensions industry to look at best practice.
The FSA Treating Customers Fairly initiative to improve pension companies information sent to customers approaching retirement.

The ABI‘s Good Practice Guide, ‘improving Customers’ retirement Experiences’ and their work with member companies to promote best practice.

ABI’s work with member companies to simplify and speed up OMO transfers, Options

AEGON UK

In the UK AEGON offers pensions, life insurance, asset management and financial advice to around 2 million customers. AEGON UK has assets under administration of £51 billion and employs approximately 4,900 staff.

AEGON is one of the world’s leading insurance groups with approximately 30 thousand employees world wide and 40 million customers in the Americas, Europe and Asia. AEGON's revenue generating assets totalled EUR 344 billion at June 30, 2008.

Keywords: Pension, Annuities, Annuity, Pensions

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