Pension Open Market Option Warning

Pension Open Market Option Warning

A report in an industry publication has claimed that The Pensions Advisory Service (TPAS) has warned that trustees could be guilty of maladministration if they fail to advise members buying an annuity about the open market option.  

TPAS chief executive Malcolm McLean said: “The majority of people do not shop around and Insurance companies and trustees need to be quite clear about OMO to give people the best annuity their pension can buy.  If people purchase an annuity without the knowledge of OMO, it could technically not be classified as a lifetime annuity and therefore could be seen as an unauthorised payment with tax consequences for both the scheme and the individual concerned”.

Our view

Insurance companies for too long have not given clients enough information to make an informed decision about their rights at retirement to shop around.  Some companies even make it so difficult it is quite unbelievable.  Some make the paperwork so complex, even professional advisers struggle and others correspond direct with the public and try to circumvent the adviser that has written to them by sending all correspondence direct.  

The regulator needs to stand firm here.  For the public good, the rules should be that a pension annuity open market option cannot be processed without an independent financial adviser having involvement to ensure that a member of the public gets the best deal.

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