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FCA broadens retirement market study after Budget changes

The FCA has broadened the scope of its retirement income market review to look at risks associated with new products following the radical pensions reforms announced in the Budget.

In February, the regulator announced a 12-month competition study into retirement income after publishing its annuities thematic review which found serious failings in the current market.

In his Budget speech in March, Chancellor George Osborne announced plans to allow savers to take their entire pension pot as cash when they reach age 55. The reform will be introduced in April next year.

Today the FCA has set out revised terms of reference for its market study.

The study will now cover the new products and business models likely to arise in response to the changes in the Budget, as well as the role of advice and guidance.

The FCA says: “We will look to understand how the market is likely to develop in these respects and in relation to existing products (such as enhanced annuities) in order to identify potential competition risks and vulnerabilities to consumers in the new landscape.”

The study will also look at whether there are issues to address in the at-retirement guidance service announced alongside the Budget reforms, as well as wider consumer protection issues.

The FCA will undertake a comparative analysis of international approaches to retirement planning in countries where annuitisation is not compulsory.

A supervisory review into sales practices of annuity providers was originally going to form part of the market study into retirement income.

The FCA says the focus of this work remains unchanged, but it will now be conducted as a standalone thematic review, to report by the end of the year.

Good and poor practice identified by the review will feed in to the market study, as well as the FCA’s consultation on the implementation of the guidance guarantee.

The FCA says the market study has been delayed, with findings due to be published later than the original deadline of February 2015. 

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  1. One of the biggest risks to pensioners will be the FCA themselves blurting out ill considered pronouncements that result in funds being frozen as with TPLIs.

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