The Financial Services Consumer Panel is calling on the Government to force employers to offer a non-advised workplace annuity service to address the “failing” market.
The Consumer Panel has today published a report into the annuity market and calling for urgent reform.
The Panel says the FCA should create a code of conduct for non-advised annuity sales focusing on disclosure of charges.
It wants to end opaque commission arrangements, which it says have grown due to the rise in non-advised sales.
It wants a rigorous market study to examine possible exploitative annuity pricing.
The Panel is also calling for the open market option to be strengthened and for the Money Advice Service to establish an annuity adviser website.
Annuities shave come into the political firing line as payments have plunged due to low interest rates and gilts.
Pensions minister Steve Webb has lashed out at the “excess profits” of annuity insurers.
Labour has tabled a series of amendments to the Pensions Bill to push for compulsory shopping around.
Consumer Panel chair Sue Lewis says the Open Market Option isn’t working and urgent reform is needed.
She says: “We are seeing a shift towards purchasing annuities via ‘non-advice’ routes, which means reduced consumer protection if things go wrong.
“The increase in non-advice sales appears to be driven by light touch regulation and higher profit margins, not consumer demand.
“We urgently need to reform this market, particularly for those with smaller pension pots, who usually can’t get independent advice. Our recommendations are intended to make choosing the right annuity more straightforward”.