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FCA to clampdown on annuity market after thematic review

The FCA is set to crack down on annuity providers and distributors after its thematic review on the extent of consumer detriment caused by market failure.

The regulator’s review of the annuity market, which began in January last year, set out to discover how much customers are losing out from not shopping around  and whether there are firms or particular groups of consumers where this detriment is more likely to occur.

The FCA has also looked at whether firms’ processes for providing annuities facilitate or inhibit shopping around.

The findings of the review will be published on Friday.

A source close to the review says the FCA has identified how much consumer detriment is being caused by the annuity market “not working properly”.

The source says: “The FCA has found a smoking gun, although they won’t identify the fingerprints on the trigger.

“They have quantified the scale of consumer detriment from the market not working properly.

“They are going to come out with numbers and they are going to identify that consumer purchasing patterns are not where they should be, so people are not making good buying decisions.”

The FCA has also investigated annuity broking websites following criticism of this market by the Financial Services Consumer Panel.

The source says: “The FCA has done a study of annuity pricing looking at the manufacturers and they have also been looking at annuity broking websites. Clearly as we saw from the FSCP report it is a mixed bag in that space.

“The FCA won’t reach any firm conclusions about where to go next, so it will take a long time before we get anywhere with any of this.”

LEBC longevity divisional director Nick Flynn says: “The FCA needs to shake up and modernise the industry. Too much is currently left to consumer understanding, and not enough is simple and clear cut. Terminology is confusing and needs to be simplified. It is no wonder so many people simply accept their existing insurer’s annuity offer, and so few shop around.”

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