Labour pushes for compulsory OMO brokers

Shopping around at retirement could become the default position for everyone in auto-enrolment schemes following an amendment to the Pensions Bill filed by Labour today.

Labour pension shadow Gregg McClymont’s amendment would ensure that all auto-enrolment scheme members enjoy the benefit of a shopping around broking service to help them find the best deal.

Other amendments to the Bill filed today include powers for the government to cap charges, the extension of transitional arrangements for women within 15 years of state pension age in 2016, rules strengthening the governance of workplace pensions and the removal of short service refunds on occupational schemes

The amendment says: –

(1) Any qualifying money purchase scheme must direct its savers to an independent annuity brokerage service or offer such a brokerage service itself.

(2) Pension schemes shall ensure that any brokerage service selected or provided meets best practice in terms of providing members with—

(a) an assisted path through the annuity process;

(b) ensuring access to most annuity providers; and

(c) minimising costs.

(3) The standards meeting best practice on decumulation shall be defined by the Pensions Regulator after public consultation.

(4) The standards set out in subsection (3) shall be reviewed every three years and, if required, updated.

Hargreaves Lansdown head of pensions research Tom McPhail says: “Not only do retirement brokers help investors to work out how to draw on their retirement savings, they perform a vital role in helping them boost their retirement income by thousands of pounds. An increase of 30 per cent to someone’s retirement income is fairly typical and they benefit from that increase for the rest of their lives.’

“Annuity brokers act as the ‘agents for competition’ forcing insurance companies to offer their best possible deal. If you don’t use a broker you can’t realistically expect to be getting the best deal.’