The FCA is under pressure to accelerate its annuities competition investigation after a thematic review found serious failings in the current market.
The regulator’s 12-month thematic review of the market, published today, reveals 80 per cent of people who buy an annuity from their existing provider would be better off if they shopped around and switched provider.
The FCA is also concerned that providers may be incentivised to prevent consumers from shopping around because they make more money from existing business compared with open market business.
As a result, the regulator is carrying out a 12-month competition probe after which it may propose rule changes to address the problems in the market.
Independent pensions consultant Ros Altmann says: “The FCA has powers to protect consumers properly, but it is launching another review rather than acting immediately.
“The reason why immediate action is so important is that this market affects so many people and the transactions they are making are irreversible.”
Radcliffe & Newlands chartered financial planner Mel Kenny says: “The problems highlighted by the FCA have been known and documented for years. They have been incredibly slow to react on this issue.
“There are good providers out there but there are also some very bad providers. The FCA needs to come down hard on those who are consistently not offering their customers a good deal.”
Labour has proposed forcing all employers to offer an independent annuity broker service to employees at retirement.
Labour shadow pensions minister Gregg McClymont says: “David Cameron’s Government have ignored this problem for far too long, refusing to fix the broken annuities market and rejecting Labour’s changes to the Pension Bill which would have helped hard-pressed savers facing a cost-of-living crisis get a better deal.
“Later this month the Pensions Bill is back in the Lords and Labour will again demand the government accept our amendments and take action to help savers.
“A Labour Government would require pension companies to refer savers to an independent broker. This would ensure they get value for money when they turn their hard-earned savings into retirement income.”