The Financial Conduct Authority (FCA) has made it a requirement for firms to rank their annuity products against their peers and simplify the information they give to consumers in the form of wake-up packs.
The regulator found a lot of consumers were not getting the best deals in retirement because bad communication from their provider stopped them shopping around in the open market. As we advised previously, the FCA had found that around 80% of people who had previously bought an annuity could have got a better deal.
It will ask firms to redesign their wake-up packs, and to consider including signposting letters and standardised pensions statements, before trailing them out on consumers over the coming months.
Firms will also need to rank their annuity products against their peers so that consumers can “easily identify” if they could be getting a better deal by shopping around.
The proposals were first published in an interim report on the regulator’s market study in December and had received “considerable support” from the industry, the FCA said.
The FCA expects the recommendations to be implemented by 2016, following its wider review of rules in the pensions and retirement area in summer 2015.
The regulator is also working with the government to develop a pensions dashboard – allowing consumers to see all their pots in one place – following the review.
It said it will “closely monitor” product sales by type and channel; the proportion of consumers purchasing from their existing provider as opposed to shopping around; consumer take-up of the Pension Wise service and financial advice; the number of consumers giving up guaranteed annuity rates; and the levels of transfers from defined benefit to defined contribution schemes.
Director of strategy and competition Christopher Woolard said: “The retirement income market is set for the biggest change in a generation. Over the next 12 months we want to ensure that the market is fit for purpose in the new landscape.
“We received considerable support for our proposals and we will be working with Government and the industry to implement all of our recommendations so that consumers can have confidence that they are getting the best possible outcome when making decisions on their retirement income.”
At TLW we feel that this is great news for those approaching retirement as it will allow them to make more informed decisions about annuities and how best to plan their retirement.
However, for many millions of people these changes come too late as they have already purchased annuities which are paying them significantly less than they could have been entitled too.
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