Central to the proposals are five 'Remedies' which the FCA will consult on, design and then deploy, some in 2016, in order to address a number of the market concerns.
Steve Folkard, Director in Insurance at PwC said:
"The creation of annuity comparisons and the significant step change in looking at how consumers make decisions will move the focus away from product and towards creating a more compelling customer journey. Whilst this is clearly welcome it presents many real risks and challenges. Firms will need to support and guide customers without straying into personal recommendations and those without competitive propositions may be designing journeys which actively decimate their own portfolios.
"Firms without competitive propositions who have previously benefited from customer inertia will be faced with a real commercial challenge. Build a journey that will shrink their customer base, or step up to the mark with more competitive propositions that make the increased cost of building a more sophisticated customer journey worthwhile."
Further comments on the individual remedies are set out below:
Remedy One will require firms to provide annuity comparisons initially, ranking their own position, and then in the longer term for drawdown and other retirement products. This will need significant investment and careful presentation to ensure the annuity comparison does not dominate the information process and create bias when consumers frame their decisions across the choices available.
Remedy Two will require firms to look at how consumers make decisions, both in relation to the new retirement risk warning requirements, and during the retirement journey more widely. For some firms this will mean a significant investment in new expertise, and modifications to development processes to fully integrate behavioural considerations into the retirement journey. This will be new territory for some firms, and the need to be able to evidence how this has been successfully achieved through measurement and testing will mean adopting a more sophisticated approach than some have been used to.
Remedy Three adds behavioural trialling in the pre-retirement phase, with a focus on the wake-up mechanisms and how they can be improved.
Remedy Four proposed the concept of a pensions dashboard, which will enable consumers to see all of their holdings in one place. This has long been an aspiration for many in the industry but it is likely to be costly to implement and this is referred to Government for consideration.
Sitting across all of the market will be more extensive data collection and monitoring by the FCA, and with it the expectation of more informed challenge of firm behaviour.
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