Conservative MP David Mowat has called on the Government to create a Nest-style body to compete with annuity providers.
Policymakers are coming under growing pressure to address perceived failings in the annuity market, with an FCA review of annuity profit levels due to be published next month.
Speaking during a debate on annuity reform in Westminster Hall this week, Mowat accused the pensions industry of a “vicious” application of caveat emptor – “buyer beware” – in the annuity market.
He said: “I believe in the free market…but this market is not working.
“It is reasonable the Government thinks very seriously about providing products to compete with the industry. I think it will happen because we cannot allow the market abuse that has been going on for 20 years to continue.”
Former Treasury minister Mark Hoban suggested the Association of British Insurers’ shopping around code of conduct had helped “shift the balance” of the annuity market towards consumers.
However, he raised concerns about a lack of clarity in the non-advised market, particularly in relation to commission levels and whether the service provided covers all annuity providers.
Treasury exchequer secretary David Gauke said the Government wants to see evidence the ABI code is changing consumer behaviour when shopping around for an annuity.
He said: “If this does not happen we will not hesitate in considering further action in this area.”
Investment Sense marketing and relationship manager Philip Bray says: “Anything that improves competition is a good thing but the real problem in the annuity market is distribution.”