The review will be in two phases over the course of the year, so will be work taken forward by the Financial Conduct Authority (FCA) when it forms in April this year. The FCA aims to make markets work better to provide a fair deal for consumers and our work on pension annuities is part of this.
The FSA's thematic review on annuities began in January 2013, and is likely to continue through to the second half of this year. This project is exploring the risk of detriment that consumers may face as a result of not shopping around when purchasing an annuity.
The first phase of this work will consider the level of detriment consumers suffer from not shopping around, and whether there are firms or particular groups of consumers where this detriment is more likely to occur. This will involve a pricing survey of all annuity providers, and will compare the rates available to consumers through a range of distribution channels, including rates available through the Open Market Option and those only available to existing pension policyholders.
The second phase will depend on the outcome of the first phase, and will consider whether firms' processes for providing annuities facilitate or inhibit shopping around. The timing of this work will take account of the implementation of the ABI's Code of Conduct on 1 March 2013.
Nick Poyntz-Wright, head of life insurance, FSA said:
"The FCA has set out its vision to make sure markets work well so consumers get a fair deal. An annuity purchase is an important one off decision that has long term consequences for individuals if they get it wrong. We want to understand the level of the potential detriment for consumers if they do not shop around to see if there are ways to make this market work better for consumers."
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