Securing a decent retirement income will be key to ensuring you're able to live your post-work years in comfort, but unfortunately, it can sometimes be easier said than done. Luckily, the industry regulator has stepped in to ensure a better outcome for consumers, and has confirmed that a number of changes are in store for the industry.
The Financial Conduct Authority (FCA) first proposed these changes following its review of the retirement income market. Its initial report, published in December, found that consumer choice in the market was lacking, which often meant that those choosing retirement income products didn't get the best outcome – in other words, the market wasn't working well enough for consumers, so many people ended up with lower incomes than they could have done.
In the report, the FCA made several recommendations to rectify the various issues identified, which have become even more pressing given the forthcoming pension reforms. Happily, it's been confirmed that those recommendations will be taken forward.
The proposed remedies are as follows:
The regulator also wants firms to better frame the options available in order to help consumers make good decisions, rather than to drive sales of certain products, ensuring that the consumer's best interests really will be at the heart of the whole process. It will now monitor the market to track consumer outcomes, as well as the take-up of Pension Wise, and will consider the replacement of wake-up packs and annuity comparison processes as part of its work in the year ahead.
The proposed changes have been largely welcomed, as Richard Eagling, head of pensions at Moneyfacts, comments: "It is imperative that the pensions industry and the regulator deal with the vast number of individuals who are still missing out on a higher retirement income by not shopping around, particularly as the pension reforms will widen the choice for retirees and give them even more to think about.
"The FCA's final Retirement Income Market Study once again stresses the fact that competition in the retirement income market is not working as well as it could for consumers, but the proposals represent a real opportunity for the industry to make changes to ensure that everything possible is in place to help individuals make the best choices when it comes to their retirement income.
"Making it a requirement for firms to provide an annuity quotation ranking so that consumers can easily identify if they could be getting a better deal makes real sense and is long overdue. It's simply unrealistic to expect many retirees to have the time and inclination to carry out their own research on who is offering the best annuity rate. The development of a 'Pensions Dashboard' to enable individuals to view all their lifetime pension savings in one place is also an excellent idea, but it is likely to be a while before this sees the light of day, leaving today's retirees still vulnerable to making the wrong choices."
So, even though the changes are largely positive and could help you secure a higher income, some could take a while to come to fruition – but just what can you do until then? The answer is simple – take control and consider the options yourself! If you've never thought about your pension pots, the time has come to make a change, because being informed and fully engaged can be vital when it comes to securing a decent income.
For instance, do you know how your pension is performing? Do you know how much you've got saved, or even where all your pension pots are? If you've had several jobs, you could well have several pension pots floating around, too, so it could be an idea to consolidate them, or at the very least track them down – use the Government's pension tracing service to find any lost pensions.
Or, if you're rapidly approaching retirement, you need to start seriously thinking about how you'll secure an income. Consult the Pension Wise service to get started, seek professional advice, or if you're ready to consider your options, check out our no obligation annuity planner to see what's available. The FCA's changes may take a while to come into play, but that shouldn't stop you from securing the best retirement income possible.
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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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