FCA to force annuity providers to show customers better deals

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The FCA will force annuity providers to tell customers how much they can gain from shopping around.

The regulator will set down a format under which providers will need to give customers personalised information on their options.

Providers will need to show how much the highest quote available on the open market differs from their own and offer customers a prompt to access the best quote through a link in the document.

Announcing its plans today, the FCA said that its research had shown 60 per cent of annuity customers failed to switch providers when they bought one, despite an estimated 80 per cent having a better deal available to them.

FCA director of strategy and competition Christopher Woolard said: “Although sales have declined since the pension freedoms were introduced, annuities still play a significant role in retirement provision. It’s important that consumers shop around to get the best deal for them – yet our previous work found that very few people actually did so.

“We believe that the proposals we have outlined today will engage consumers and allow them to make better decisions, increasing shopping around and competition across the market.”

The FCA – which is also mandating providers tell consumers if their annuity is a single or joint life product, if the income rate is guaranteed and the size of the total pot used to purchase the annuity – is planning to introduce the new disclosure requirements in September 2015 after testing showed a 27 per cent increase in how many consumers may compare different providers as a result.

Group communications director at Just Retirement Stephen Lowe says: “The failure of some providers to explain the benefits to consumers of shopping around when purchasing a guaranteed income for life product has been a longstanding problem. The FCA is taking positive steps to address this problem but we think there is a strong case to go further and make it a requirement for all purchases to be made via the open, external market to ensure consumers get the best deal.”

The number of open market options available to consumers has decreased in recent years. According to Hargreaves Lansdown, six providers have withdrawn from offering the open market option since pension freedoms were announced. LV= also pulled its enhanced annuity offering earlier this month.

The Association of British Insurers said that providers “fully support efforts to encourage savers to shop around” and would provide the FCA with “helpful feedback on how to make the plans work successfully for customers in practice.”

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. How long before we are obliged to tell prospective clients that there is a cheaper (therefore must be better) IFA round the corner?

  2. Makes sense, annuity market is at an all time low, very little business being written. Thankful that the regulator rolls up its sleeves and gets stuck into the sector. Give me strength!

  3. Nanny State, next thing you know is Tesco will have to tell you that Heinz baked beans are 5p a can cheaper at Morrisons. People who want to find cheaper deals should do the work to find a deal themselves!!

  4. Over regulation totally stifling innovation and competition again. Eventually there will only be one provider left and the whole idea will have back fired. It’s like phoning Tescos for a car insurance quote and being told Sainsbury’s will do it cheaper and here’s their number – how on earth will providers be able to stay in the Market.

  5. the idiots are not fit for purpose. For once do something useful like change the way pension statements are currently displaying ‘benefits’ at retirement. JOKE

  6. Firstly, they are planning to introduce this from 2015!!.

    Secondly, surely quotes already say the purchase price of the annuity, any guarantee period, and if it is Single or Joint Life.

    Do the FCA REALLY have nothing better to do?.

  7. One only has to take a step back and look at this for what it really is….. restriction of trade, in a word, where a company cannot promote its “own” product but has to force a prospective client to look else where !
    Will we get to a situation where, we will be just to scared to sell our own product and services because Joe Soap around the corner may have been a bit cheaper or offered a bit more………

  8. What a lot of rubbish by the FCA who “claim “, they are going to force ” competition ” in annuities ? The FCA has destroyed high quality adviser practices through their restrictive trade practices – and as acting as a Government Ponzi Scheme along with the Gov’t NHS Ponzi scheme – the destruction of professional services such as Doctors Teachers Solicitors and Professional Advisers – reducing quality, and statutory rights of the people of England ( and the UK Independence Party ) to gain access to Health Education and Finances. Insurance companies and Banks operate their Pyramid Selling Schemes form the Board room down through the ranks to the lowest levels – who are placed in front of customers – such as in banks, making life more difficult for consumers and their dealings with these poor quality banks and insurance companies. Pensions have been attacked because the population of UK is exploding ( and the Gov’t did not notice it – apparently) – now the aim of Gov’t is to transfer money fom consumers pension pots into Gov’t – as a result of their reckless spending activities – and reducing estates passing down through the families – many of whom fought in the World War (s) for democracy and Freedom – from tyranny, removal of Independence and the “Fifty Shades of May”

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