Retirement Advantage responds to FCA policy statement on annuity information prompts
Ironically, since the introduction of the pension freedoms, the situation has actually got worse, so we need some radical thinking.
Annuity providers will be required to inform their customers how much they could gain from shopping around and switching provider before they purchase an annuity under plans announced today by the Financial Conduct Authority (FCA).
- Pension companies will need to show how much people may lose out by not shopping around
- The implementation date is 1 March 2018
- 50,000 people a year (60% of the market) don’t currently shop around so are more likely to receive poor value from their annuity
- Research1 shows two-thirds of pension savers (aged 50+) think it should be compulsory to shop around for retirement products
Link to FCA release: https://www.fca.org.uk/publication/policy/ps17-12.pdf
Andrew Tully, pensions technical director at Retirement Advantage, said: ‘Any attempt to encourage more people to get better value from their retirement savings is positive. The problems are deep rooted and far too many people continue to receive poor value from their annuity due to the lack of shopping around. Ironically, since the introduction of the pension freedoms, the situation has actually got worse, so we need some radical thinking.
‘There are numerous issues to overcome in the practical implementation of a comparator tool which genuinely helps customers get the best deal, taking into account their individual circumstances. The FCA has recognised this by requiring information to be included highlighting the benefits of taking health and lifestyle into account.
‘However, the monetary figures given to customers will simply show a comparison of standard rates and won’t show the additional money a customer could receive every year through an enhanced annuity. We’d encourage the FCA to continue to monitor appetite for enhanced annuities to consider how effectively this prompt is working.’
‘The FCA should also explore whether it would be possible to make shopping around compulsory, as this is likely to produce the best customer outcomes. Our research1 shows that two thirds of people aged over 50 agree you should have to shop around for retirement products rather than simply buying a product offered by your current pension company, compared to less than one in ten who disagree.’
- Research was conducted by YouGov Plc. Quantitative fieldwork conducted between 15 and 19 August 2016, surveying 1009 UK adults aged 50+ who have a DC pension and who are not in retirement