The Financial Conduct Authority (the “FCA”) launched a market study into retirement income on February 14th following their own report that the pension annuities market was not working well for consumers. Annuities are a guaranteed income for life. They are a financial product purchased by those turning their accumulated pension earnings into income upon retirement.
Perhaps the most significant feature and worrying aspect of the report is the fact that eight of out ten consumers who purchase their annuity from their existing pension provider could get a better deal by shopping around on the open market.
These annuities are important as one of the likely largest financial decisions in a person’s life. Although the FCA study will look at the retirement income market as a whole by looking at other products such as the state pension and ICA accounts, annuities have come under particular fire in the FCA’s provisional report due to consumers lack of understanding and engagement when purchasing them. The market study will include examination the various providers of retirement income products to consumers and the advice consumers receive.
Since the Financial Services Act 2012, the FCA has had concurrent powers to the OFT as a competition regulator. It launched this market study under those powers.
A final report on the market including recommendations for market reform is expected within a year. However, in the shorter term, the FCA invites views on the topic by 14 March 2014. Consumer bodies and other market participants can submit their view on the competitive aspects of the market here.