The FCA has published Market Study 14/3.3: Retirement income market study: Final report – confirmed findings and remedies (MS14/3.3).
MS14/3.3 follows the FCA’s December 2014 interim report which found that competition in the retirement income market was not working well for consumers. MS14/3.3 summarises the responses received to the FCA’s consultation on its interim report and confirms that the FCA is making its provisional findings final and will be taking forward its remedy proposals.
The confirmed provisional findings include:
- many consumers are missing out by not shopping around for an annuity and switching providers, and some do not purchase the best annuity for their circumstances;
- consumers are deterred from engaging with their options by the length and complexity of wake-up packs, or because they do not believe the sums involved make shopping around worthwhile;
- consumers’ tendency to buy products from their existing provider weakens competitive discipline on incumbent firms and makes it harder for challenger firms to attract a critical mass of customers; and
- consumers are highly sensitive to how options are presented to them. Savers reaching retirement will face a landscape that is more complex and will need support in making the right choices.
The FCA’s remedy proposals include:
- requiring firms to provide an annuity quotation ranking so that consumers can easily identify if they could be getting a better deal by shopping around;
- redesigning and behaviourally trialling the information that consumers receive from their providers, such as wake-up packs, in the run up to their retirement; and
- in the longer term, the creation of a pensions dashboard which will allow consumers to see all their pension pots in one place.
In addition, the FCA wants to see firms framing the options available to help consumers make good decisions, rather than to drive sales of certain products. The FCA will also be monitoring the market and tracking consumer outcomes, as well as the take-up of the Pension Wise service.
The next phase of the FCA’s work on annuity comparisons and the replacement of wake-up packs will take place as part of a wider review of its rules in the pension and retirement area in summer 2015.
View Retirement income market study, 26 March 2015