FCA raises non-advised drawdown concerns

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The FCA says it will consider “stepping in to break the link” between providers and retirement decisions if there is evidence consumers are not shopping around for drawdown products.

Speaking at the Westminster Employment Forum in London last week, FCA director of competition Mary Starks said: “We’re very conscious that if we see a significant increase in  people not moving around in retirement, and in buying drawdown from existing providers we will have to look very hard at how we can make comparisons easier and step in to break the link between the provider and the retirement phase by prompting a shopping around point.”

She was responding to a question on whether the problems experienced by those who did not shop around for the best value annuities were being replicated with drawdown products post-pension freedoms.

In September, Money Marketing revealed the extent of the boom in non-advised drawdown sales since the freedoms took effect in April.

Standard Life said the product was its “fastest-selling solution ever” while Scottish Widows recorded 4,000 direct drawdown sales.

Starks said: “It is certainly an area of concern. It is simply less easy to compare drawdown products, with an annuity you can use a price comparison site to compare rates.

She added the regulator would consider mandating a compulsory open market purchase.

She said: “One of the options on the table a couple of years ago in reference to the annuities market was looking at the Chilean model where people are forced to go to the open market rather than just given the option.

“Once we see what’s happening in the market we’ll have to keep those options in mind.”