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FSCP calls for urgent annuity reforms

FSCP calls for urgent annuity reforms

Category: Annuities

Updated: 09/12/2013
First Published: 09/12/2013

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The Financial Services Consumer Panel (FSCP) is calling for urgent change to the annuities system in order to "prevent millions of pensioners from losing out".

The call comes after the panel's research into the consumer experience of purchasing an annuity found that the market is not working as well as it could be for the majority of consumers.

This has led the FSCP, which is a statutory body set up to advise Government on the interests and concerns of consumers, to recommend a number of reforms.

It says the Financial Conduct Authority should:

  • Set up a code of conduct for the non-advice market that would emphasise the need for high professional standards, the transparent disclosure of charges, and a clear explanation of the implications of non-advice for consumer protection.
  • Address the causes, including light-touch regulation and non-transparency of commission, of the current regulatory arbitrage in which non-advice services are expanding at the expense of the professional advice market.
  • Investigate the possible "exploitative" pricing of annuities sold by insurance companies to their customers who have saved with them for a pension.
  • Strengthen the definition of the Open Market Option, which encourages a pension saver to shop around for the best annuity rate rather than choosing their pension provider's default offer.

Commenting on the findings of the research, Moneyfacts' Head of Pensions Richard Eagling said:

"The Financial Services Consumer Panel is right in its assertion that the current annuity market is not working for the majority of consumers and greater regulatory action may be inevitable.

"The fixed nature of an annuity contract means that once a decision is made there is no going back, so individuals must explore the full range of retirement income options open to them beyond simply staying with their existing pension provider."

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