Labour files OMO amendment to Pensions Bill

Labour has today published an amendment to the Pensions Bill that would make all auto-enrolment schemes offer members a suitable annuity broking service at retirement.

Gregg McClymont

The amendment, filed by Labour pensions shadow Gregg McClymont, MP for Cumbernauld, Kilsyth and Kirkintilloch East, says: –

‘Any qualifying money purchase scheme must direct its savers to an independent annuity brokerage service or offer such brokerage services itself. Pension schemes shall ensure that any brokerage service selected or provided meets best practice in terms of providing members with an assisted path through the annuity process, ensuring access to most annuity providers, and minimising costs. The standards meeting best practice on decumulation shall be defined by the Pensions Regulator after public consultation, reviewed every three years, and updated, if required, subsequent to such reviews.’

Recent ABI consumer research shows that only 22 per cent considered buying an enhanced annuity and just 16 per cent actually did so. 

But annuity broker Hargreaves Lansdown says two thirds of its customers in June used health and lifestyle when shopping around to increase their income in retirement. It reports the average enhancement seen in June 2013 was 35.67 per cent, based on comparing the lowest open market annuity rate with the highest rate, based on analysis of 1,615 comparative enhanced annuity quotations produced by its search engine from 1 to 30 June 2013.

Hargreaves Lansdown head of pensions research and chairman of PICA Tom McPhail says: “This is a vital amendment to the Bill as without it millions of investors would end up receiving sub-standard incomes from their auto-enrolment schemes when they reach retirement. The amendment ensures that investors will be given a decent chance of buying the right annuity at a competitive rate. A good shopping around service at retirement adds as much value as if you increased the contribution rate on pensions from 8 per cent of earnings up to 11 per cent.”