The date of the RDR draws ever closer, yet you get the impression that the regulator still has not thought it through.
It was only a fortnight ago that the new chief of the FCA Michael Wheatley put his head above the parapet to warn that there were examples of bad practice among bank advisers. They were selling five-year investment bonds to people “not expected to live past the next World Cup”, he said.
The quote would be amusing if it was not so serious.
The RDR looks more likely to push the general public to their local high-street bank for financial advice than it is to IFAs. And then comes along a damning report from the NAPF and Cass Business School into the annuity market which provides further evidence that the RDR may do more harm than good.
The report is punchy to say the least, accusing the annuity industry of using “murky pricing and “sharp practices”.
The authors’ main concerns are that workers with smaller pension pots will suffer the most. Some 80 per cent of retiring workers with DC plans have pots that are less than £50,000 in size and with autoenrolment around the corner hundreds of thousands, will be in the same boat.
Not that the Association of British Insurers reckons that there is a problem. True to form, it gives the distinct impression that the NAPF has over-egged the whole story and insists that 70 per cent of people do shop around. It is “consulting” on getting the remaining 30 per cent to do the same.
The NAPF does not buy the ABI’s response and nor do I.
There has been evidence that suggests that many pension providers do the bare minimum when it comes to explaining that customers can go elsewhere for an annuity. In many circumstances, the wording used in the literature suggests that people would lose out if they did apply to another annuity provider.
Providers have also long been accused of duping pension savers out of a third of their retirement income because they are using complex jargon and legalese to put them off shopping around for the best annuity.
Crucially, the NAPF reckons that the ABI is getting confused between the DC market (which is growing) and the personal pension market (which is flat).
“While ABI research indicates that more DC customers are shopping around, we understand that the figures are more indicative of activity in the individual personal pension market, where individuals ’buy’ a pension product, usually through an adviser, rather than in workplace DC, where employees join the company pension scheme,” the report said.
With Nest and autoenrolment, more and more people will be passive in their annuity choice and simply accept what is handed to them.
As each year goes by, Britons are subconsciously being told it is your future, it is your retirement and so it is your problem. The problem is that most people do not realise it yet. It means that increasing numbers of people in the years ahead are going to need expert advice more than ever, not sales patter from a junior bank clerk.
Final-salary schemes are a spent force and definedcontribution schemes are still at the trial stage.
As the NAPF and Cass have pointed out, the end game is as important as building the pension pot in the first place.
The ABI’s response is worryingly dismissive. Few people truly believe that consumers are making the best choice when they come to retire and the trade body should be above taking the report so personally.
The ABI appears to be turning a blind eye to another RDR banana skin and it could have serious repercussions for millions of workers.
Paul Farrow is personal finance editor at the Telegraph Media GroupMoney Marketing