To ask the Secretary of State for Work and Pensions
(1) what estimate he has made of the number of pensioners who switched annuities when they retired in (a) 2010, (b) 2011, (c) 2012 and (d) 2013;
(2) what steps he is taking to encourage pensioners to switch annuities when they retire.
I have been asked to reply on behalf the Treasury.
The Government set up the ‘Open Market Option (OMO) Review Group’ in 2011 to consider how to make shopping around for an annuity a ‘default’. Their baselining exercise showed that, in 2010, 32% bought their annuities externally. Research by the Association of British Insurers (ABI) in 2011 shows that this figure had risen to 44%. Separate work by the Financial Conduct Authority (FCA) found that, in 2012, 60% of annuities were purchased through the customer's existing pension provider or a third party with which their provider has an arrangement.
Following the work of the OMO Review Group, the ABI's Code of Conduct on Retirement Choices, which came into effect in March 2013, requires all members to provide better information to consumers to help them shop around for the best annuity to meet their needs. The OMO Review Group will be evaluating the effectiveness of these measures. The FCA has also just launched a Retirement Income Market Study, which will assess whether competition in this market is working well for consumers. Further information, including a link to. the terms of reference, can be found here: