-- Force annuity buyers to shop around for the best rate --


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Insurance giant Aviva has broken ranks with its fellow pension providers, arguing that retirees should be forced to shop around for an annuity.

The typical person could boost their retirement income by between 10pc and 20pc by getting the best annuity deal.

The company is stepping up pressure on the Government to make the "open market option" – where customers must find the best value provider for their lifetime income themselves rather than taking a default option from their pension provider – the default.

Aviva is meeting Mark Hoban, a Treasury minister, to discuss this in the next few weeks.

“The current retirement market is failing today’s retirees and the situation needs to be addressed as a matter of urgency,” said David Barral, the head of Aviva’s UK Life arm. “Without action now, this could mean serious consequences for the retirement income and security for future generations.

“Aviva is calling for changes throughout the industry to enable retirees everywhere to get the best possible deals in retirement. Greater transparency around the open market option would empower customers to obtain the retirement income they deserve.”

Opponents of Britain’s big pension companies have argued that they do not want their customers to use the open market option (OMO), because they make money from customers who take their default option. The typical person could boost their retirement income by between 10pc and 20pc by getting the best deal, and someone with certain health conditions or who smoked could boost theirs by up to 50pc through purchasing an "enhanced" annuity.

“Many companies publish the annuity rates they offer to their customers – especially those that are actively marketing their annuity products to new, or ‘external’ customers – but there is still a secretive significant minority allowing no comparisons, which can leave customers greatly disadvantaged if they don’t know they can shop around for their annuity,” Mr Barral said.

“In the UK in 2010 alone 385,000 people purchased annuities and figures indicate that only 32pc of customers bought annuities from a different company from the one they saved with. This could mean that people are missing out on millions of pounds of lost retirement income every year."

Source: Aviva

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