An ABI missive to members has been intercepted by Money Marketing. The Government, in the guise of the Treasury’s increasingly famous Mark Hoban, is threatening a regulatory crackdown on OMO. It looks like the Pension Income Choice Association has scored a bit of a victory or at least is winning the match.

Here is the story from pensions journalist Helen Pow who is unfortunately leaving these shores to return to Oz. Story wise, this is a cracking parting shot.

http://www.moneymarketing.co.uk/pensions/govt-cracking-down-with-tough-line-on-omo/1017420.article

It is good news that ministers are getting so exercised about people not exercising OMO. The Money Debate has been arguing for this too, asking why on earth, when lawyers and claims chasers are talking of legal action against firms for not properly informing about or processing the OMO, regulators haven’t stepped in to make sure it happens. It is better than have things sorted out after the fact by ombudsman or courts or some sort of class action.

Actually in the recent weeks, the Pensions Regulator has issued new warnings to trustees. So there is one tick at least.

Of course, with this story, we are a bit at one remove from the Minister. We know what he thinks because the ABI told its members and a journalist got hold of it, but, with apologies to Mr Hoban ( for not quite knowing what was said) we still think in many ways his message needs a little bit of finessing.

To consider a broad reform of the market you need to take this issue in its parts. (Once upon a time, they would have been stakeholders. Let’s not call them that.)

First up the ABI and its members. This is the ABI membership. Centrally, the organisation is clearly trying to get everyone to meet as high a standard as possible. It just hasn’t managed it yet. Given the current situation the members would be mad not to pay heed. The minister is making them an offer they can’t refuse. Surely there is a need for some chief executives to make a few calls to some other chief executives and move things up a gear.

But there are other groups Mr Hoban should consider such as…

Non-ABI providers. I suspect some of the worst laggards may be in this group – for example closed offices. Perhaps this area needs a proper look across the piece in terms of TCF not just around OMO. This may also be the case with bank-sold pensions and their OMO information.

The whole raft of non-DB company pension schemes that are not ABI administered, needs examination too in terms of how they have been set up and what is offered when a pension is taken. Some offer limited panels for example to cover enhancement but are they wide enough?

Then the advised market needs to be considered. For those with enough cash to pay for full advice they should expect the best advice. Hopefully, mostly, they are getting it.

But what about small to medium pots? Anyone looking at this needs to consider the fact that the advice sector is in RDR-shock at the moment, and all the emphasis is on shedding clients to survive. Not a good place for OMO. What about where a plan has been set up by an adviser firm that is now defunct or in its fifth or sixth manifestation or an adviser at his third or fourth firm this decade? Those are pretty big strains on the lines of communication and there are no easy answers to it.

At least we have the annuity supermarkets and perhaps in future some sort of guided architecture that could help in this area though of course people need to realise OMO is an option even to get to the stage of comparing rates.

The Treasury and ministers may feel it does not have the time to look at all this in detail. Then again if it is serious about changing things, it will take a lot more than simply putting the frighteners on the ABI.

* And in a related issue – in the column I write each week on FundsNetwork (a relatively tongue-in-cheek look at financial services) I suggest we need someone to advise the Government on all this pension stuff. I suggest a Pensions Merlin (I really think the term Czar is inappropriate) For those of you who have not read enough of my wise words on pensions today already, here is the URL.

https://www.fidelity.co.uk/adviserservices/news-insights/expert-opinions/john-lappin/john-lappin.page

It is very difficult to see how the Government will resolve the Nest mess now that the ABI has chosen not to ride to the rescue.

On that subject, the following article stayed totally accurate for about seven hours on Friday. Those with an historical interest can read it here on FundsNetwork.

https://www.fidelity.co.uk/adviserservices/news-insights/expert-opinions/john-lappin/details.page?

It was entitled Nest Soup and suggested that the previous administration had taken things too far down the road without the agreement of the then Opposition. Though I think that criticism still stands, it was, of course, before the ABI put out its Friday evening press release saying the industry could not help with Nest. So Plan B is Plan B no longer and therefore has no chance at all of becoming Plan A.

It probably shouldn’t be so much of a surprise. If one looks at the current GPP market, providers often talk of concentrating on ‘good quality schemes’. It may be a little more sophisticated than this but I always took that to mean schemes with members with quite a lot of money.

At the heart of the Nest issue is the fact that it costs a huge amount of money to get the savings apparatus to reach people even with auto-enrolment. The amount of money that low income pension savers are going to set aside, makes it very difficult to make money, as does the requirement to cover very small employers.

Stakeholder was not really worthwhile for many of these big insurers – how on earth was Nest going to be different? It is hardly surprising the industry decided not to offer its leg again so it could be bitten twice.

Of course the ABI is not the whole pensions industry. It does not include Hargreaves Lansdown and it does not include Skandia both of which are of course huge pension players. Nor indeed does it represent the fund management industry or certainly not all of it.

However the obstacles faced by insurers would be faced by any other business that decided to try its hand. It is probably not worth risking the capital.

I had taken to calling Pada, Pweda, as in the Pensions White Elephant Delivery Authority, but I may have to eat my words.

Despite Government sceptism I am not sure Nest will still be for the chop. I can certainly see one reason it may stay. To bring it any closer to the Government, say running it through national insurance, means it will begin to look and feel like a tax to both employers and employees. And that is something nobody in the coalition is going to want to risk. But whatever choice is made, it is still going to be a very rocky road to travel down.