Schemes urged to tell members about the OMO

The authority’s thematic review will focus on two main areas – pricing and communication, particularly around the open market option.

Following the launch of the review, industry figures have suggested ways in which schemes can help members get the best outcomes. This includes carrying out due diligence for their members, such as selecting a few reputable specialist companies that can assist members with their choice of purchase.

Alan Higham, chairman of Annuity Direct, said more schemes and trustees were starting to communicate “simple messages to members” on their retirement options.

“It will become the way all schemes do it, and the FSA review continues to send the message to scheme managers and trustees that there is a significant detriment issue here, and members do need support and help,” he added.

He also suggested schemes inform members about the latest developments around annuities in no more than a one-page letter.

Higham said: “You obviously need to give them all of the other extra information, but burying those key messages in one page in the middle of an eight to 12 page document means key messages get lost.”

Danny Cox, head of advice at Hargreaves Lansdown, suggested that as the review was going to take much of 2013 to complete, it was probably best for schemes to take “a watching brief”, but added members needed to know about the OMO.

“[Shopping around] can improve incomes by as much as 40 per cent, depending upon their health,” he said.

The FSA’s review will be happening at the same time as the Association of British Insurers’ mandatory code of conduct on retirement choices goes live on 1 March.

Steve Lowe, director of external affairs at Just Retirement, said the review will reinforce the need for the Pensions Regulator to put into the occupational space similar standards to those proposed by the Association of British Insurers.

He added: “Members should be given the same level of protection to ensure they shop around and get the best deal.”

Concerns have previously been expressed by the government about the differences in the pricing of annuities and whether people are adequately informed about the OMO.