Pensioners will lose out on £3.3bn of retirement over the next 20 years if their right to the Open Market Option (OMO) is not exercised, warns the Pension Income Choice Association (PICA).

A study carried out on behalf of PICA by Oxford Economics showed that 2010 alone recorded failings in the review process costing £13.9million in pension income - £169 per policy holder.

However, should retirees review their options over the next 20 years and secure better annuities for themselves, then the study predicts that consumer spending will increase by £2.1bn. It would also give the Exchequer an immediate improvement in finances of £6.7million through savings on social security payments and increased income and indirect taxes. These savings will amount to £1.7bn by 2030.

"The changes we are proposing would ensure that people can enjoy the best income in retirement from their hard-earned savings," commented Hargreaves Lansdown's Tom McPhail, chairman of PICA. "And what's more there would be a benefit to the Exchequer's finances and a boost to the economy. There is no other measure that will achieve such benefits to the pension savers at no cost - these changes should be the number one priority on any government's list. To put these figures in perspective, a change to the retirement options process could mean adding more than the value of a TV licence onto pensioner's income in retirement, or pay over one third of the average pensioner's electricity bill."

The study builds upon PICA's recent whitepaper calling for changes to the annuitisation process at retirement, and the group is lobbying for the way people are treated at the point of retirement to be changed, with a review of retirement income options becoming the default option for retirees to ensure individual circumstances are addressed.

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