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FCA urged to overhaul pension shopping around rules

The FCA is facing calls to overhaul its conduct of business rules to encourage more people to shop around at retirement.

FCA rules currently require providers to send wake-up packs four to six months before a client’s intended retirement date.

Hargreaves Lansdown head of pensions research Tom McPhail says: “The current rules are not good enough.

“The problem is some insurers will follow the rules to the letter but inertia and a lack of understanding means they can still sell poor value annuities.”

McPhail wants to see the introduction of simple, annual pension statements in the UK.

He says from age 50 people should get a Swedish-style “orange envelope” which shows the amount of the pension pot, an estimated income that pot would provide, and where they can get more information.

He says: “People need to think about when they are going to draw their pension and how they are going to draw it. That process has to start a lot earlier than it does now and we need the FCA to be quite prescriptive about the simplicity and clarity of that information.”

Plan Money director Peter Chadborn says: “More needs to be done earlier to help people understand their pension options. Far too many people simply shop around for the best rate.”

An FCA spokesman says: “We will soon be publishing the findings of our review into annuities, which specifically looked into whether or not switching pension provider would provide a better income in retirement.

“While we are not going to pre-empt the findings, we will be considering if further work is needed to tackle wider concerns.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. For a company that charges 3% for a non advised annuity, not sure Tom should be setting the rules.

  2. The FSA took away clients choice of how to pay for advice with RDR. Why do they not do the same under RDR-2 – Take away the clients choice of doing nothing. Ban all providers from allowing anyone to take an annuity unless it is advised. It seems very a easy option, would cost little to implement and extremely easy to monitor. Is all this ease the very reason it wont happen?

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