The Financial Conduct Authority (FCA) has issued two reports this morning.
The first report contains a critical analysis as to how the whole market for retirement income is working and makes recommendations for a number of changes to establish practices. The report suggests there have been major failures in communication between firms and their customers.
The second report looks at how annuities are being sold and concludes that firms’ sales practices are contributing to consumers not shopping around and switching and thus getting the best deal from annuity purchase.
Commenting on both reports, Malcolm McLean, senior consultant at Barnett Waddingham says:
“It is interesting to note that the FCA is still convinced that for people with average-sized pension pots, the right annuity purchased on the open market offers good value for money.
“It is disappointing however, that after two years the FCA has still not completed its full review of the annuity sales process and will still be conducting further investigations into the workings of the market, which back in February they described as a “disorderly market”.
“The recommendations the FCA have made in the first report certainly have merit, in particular the need to replace the wake-up pack which in its present form is clearly not working. Also, the idea of a “pensions dashboard” or “pensions passport” which advocates have previously suggested, is worth pursuing in the interests of enabling consumers to view all their lifetime pension savings (including their state pension) in one place.
“Critics will be no doubt be surprised that despite all its criticisms of system and firms’ sales methods, the FCA has apparently found no evidence of misselling and/or the need to contemplate enforcement action against any individual firm.”
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