Fianna Fáil Finance spokesperson Michael McGrath is proposing a number of measures to protect consumers following the publication today of a report from the Central Bank on the pension income people get in retirement.
According to the Central Bank, a consumer with a retirement fund of €50,000 could increase their income by up to €29.57 per month, over €350 a year, by choosing the provider with the best rate. This is due to significantly different annuity rates. Thousands of customers are potentially living on a reduced pension income as a result.
Deputy McGrath commented “In simple terms, when someone retires they will need the pension savings they have accumulated over their working life to deliver for them as large a retirement income as possible. However, it is clear from this report that many people are getting poor value for money from their pension provider.
“The pension industry thrives on inertia and customers not fully understanding the products they are purchasing. In the UK, it has been reported that 91% of retirees buy their pension annuity from their fund manager without checking other market options. I am proposing a number of measures that I believe will help the situation:
“Firstly I believe there is a need for a requirement for any retiree purchasing an annuity to have quotes from 3 different pension providers in order to ensure that they have the best choice available to them. In too many cases, people buy their pension annuity from the same firm who had managed their fund up to that point even though there may be better value elsewhere.
“In addition, the industry should be required to provide a number of standardised products that can be more easily compared across providers. In a manner similar to the health insurance and mobile phone sectors, there is a suspicion that the provision of additional products and options is more designed to bamboozle customers than to provide them with real value.
“I also believe action is needed to reduce costs across the pension industry and improve transparency. High charges, poor returns and lack of clear understandable information have been hallmarks of the pension industry in Ireland over the years. Pension savers took a massive hit from the €2.5bn raid on their funds. The effect of this will be felt for many years to come in the form of reduced pension income. It is incumbent on the State now to act on the findings of the Central Bank report and ensure than consumer interests are protected.”