Micahel Johnson wrote an article for website Professional Pensions titled: A market-orientated solution to annuities.
"David Mowat, MP for Warrington South, recently suggested in a House of Commons debate that the coalition should create a nationalised, low-cost, annuity provider to protect pensioners from poor retirement products.
This is an excellent suggestion. But there is a more market-oriented way of achieving the same end. The current Open Market Option allows retirees to shop around for the best annuity rate, and the most appropriate product. But the evidence is that it is ineffective.
One third of over-55s have ‘never heard’ of the OMO, a problem compounded by 70% not fully understanding what an annuity is. The consequence is that many (most?) retirees end up with annuities significantly smaller than they would have had, had they shopped around.
The public’s disillusionment with annuities has been fuelled by low annuity rates, due to low interest rates, poor investment returns (over the last decade) and increasing longevity and the lack of annuity contract standardisation (which renders price comparison websites useless)."
Click here to read the full article.