The Financial Conduct Authority have said that ‘some parts’ of the annuities market are not working well for some consumers.
The FCA carried out a ‘thematic review’ of annuities in January 2013. They found that eight out of ten consumers who purchase their annuity from their existing provider could get a better deal on the open market.
As a result the FCA are to undertake a ‘competition market study’ into retirement income.
A statement from the Authority read: “Market studies are our new main tool for examining competition issues in the markets we regulate − they allow us to look more broadly at a market to analyse how competition works today, and how it might develop. The results of the thematic review have been used in developing the scope of the market study, and will inform that ongoing work.”
The FCA’s review had:
- assessed whether and by how much consumers would be better off buying an annuity from the open market rather than their existing pension provider.
- considered the drivers of provider behaviour, including assessing, at a high level, the profitability expected from their annuity business.
- commissioned a report reviewing existing research about consumer behaviour and engagement to better understand how this affects shopping around and the choice of annuity.
For more information go to: http://www.fca.org.uk/your-fca/documents/market-studies/retirement-income-market-study-terms-of-reference