Retirement Market Confused About Open Market Option

Newly launched retirement specialist, Evergreen Retirement Assurance, backed by Britannic plc Group, has commissioned extensive research into awareness and attitudes on open market option in a nation-wide MORI poll.

Using a sample of working adults aged between 45-64, the survey asked a number of searching questions to ascertain the level of understanding consumers have about retirement planning. The overall picture is one of confusion. Top line statistics demonstrate:

• More than two thirds of working adults aged 45-64 (69 per cent) had heard of the term annuity. There is a marked difference in the level of awareness by social grade with 82 per cent of ABC1s recognising the term, compared to only 53 per cent of C2DEs.
• Of those aware of the term Annuity, an encouraging 79 per cent correctly identified an annuity as 'a regular income generated by your pension fund, used to fund retirement'.

However consumers are less clear about how and where to purchase an annuity when they hit retirement

• Only 55 per cent of those that have heard of the term annuity, understand that an annuity can be purchased from any company offering the product
• 17 per cent believe that they are tied to the company with whom they built up their pension fund to purchase their annuity.
• 20 per cent simply did not know where to purchase one.
• An alarming 77 per cent of those who had heard of the term annuity did not recognise the term open market option
• But of the 23 per cent who recognised the term, 67 per cent correctly identified that it was an individual's right to shop around for the best annuity rate for retirement income

Evergreen is concerned that consumers are being kept in the dark about their options at retirement, with many merely drifting into taking an annuity from their pension provider, which may not be the most competitive rate, reducing their potential income for the rest of their lives.

Kicking off with the launch of its Enhanced Pension Annuity, Evergreen has been set up to service a rapidly growing but much neglected market and is geared to providing highly competitive annuity rates for people retiring. In addition to this, Evergreen will be introducing a number of other specialist products for retired people later this year.

Chief Executive, Mike Fuller is committed to changing perceptions about retirement. He comments:

"Open market option is a serious subject. People are simply not aware that they have choices, unless they are lucky enough to have a bright and diligent IFA on board, or have consulted one of the specialist intermediaries that can do the shopping around on their behalf."

"It is time that life offices made a commitment to educating consumers about what is available to them. After all, we are talking about quality of life and if someone has saved hard into a pension fund, the least we in the financial services industry can do is offer them the best deal available."

"Simply by selecting the most competitive annuity, a retired person can improve their income by as much 14 per cent and could be up to 30 per cent for those with a lifestyle or medical condition. This provides a tremendous window of opportunity for intermediaries." Concludes Mr Fuller.

*Source: AKG Actuaries & Consultants Ltd - March 2000

Technical details

MORI Financial Services interviewed a representative samples of 283 working adults aged 45-64 in Great Britain between 27th April and 3rd May 2000.