Aegon has called for closer co-ordination between the Financial Conduct Authority and the government on addressing the radical pension changes announced in the Budget, including the ‘guidance guarantee’.
Earlier this week, the FCA announced that, following the Budget, it will be conducting a self-contained thematic review on annuities as well as a broader market study of the general at-retirement space.
The revised terms of reference will mean the study is set to look at:
* competitive conditions across the at-retirement market, based on new consumer research;
* new business models set to launch in the wake of the Budget;
* ‘value for money’ of retirement income products; and
* behaviour of various stakeholders, including how guidance can shape consumer behaviour.
Aegon believes the FCA’s revised terms of conditions for its retirement income study points to a “possible conflict” between government policy and FCA regulation.
The Dutch-owned provider says while the government wants to give those with defined contribution pensions full freedom and choice over their retirement options, the FCA “seems more focused” on “identifying potential detriment”.
The danger is, Aegon says, that the FCA may pre-empt the changes with new regulatory controls.
While Aegon believes it is too early to predict the post-April 2015 market, when the new changes take effect, it urges the regulator to add one “pressing issue” to the terms of reference - whether limiting delivery of the ‘guidance guarantee’ to one or a very few utilities is justified on competition grounds and if banning provider involvement could lead to consumer detriment.
Steven Cameron, regulatory strategy director of Aegon, said: “We support the FCA’s intention to be forward thinking in its retirement income market study.
“But with big question marks over the scope of the guidance guarantee and the detailed tax rules, which will emerge after the Budget consultation, it will be very difficult to reach any firm conclusions around consumer behaviour, new solutions and possible areas of detriment.
“In reality we won’t know the likely shape of the new pensions environment until early next year at the earliest.”
He added: “...if any findings from the market study are to be fed into the development of the ‘guidance guarantee’ from next April, they must report back well before their current year end plan.
“One pressing decision the government will make is whether to allow providers to offer the guidance guarantee.
“The revised terms of reference highlight the FCA’s new objective to promote effective competition which can lead to more innovation and provide a broader range of better products and services that meet consumer needs.
“The guidance guarantee is one such service and we call on FCA to determine how it can open up a competitive market here and allow providers to add this to the ways they support their customers.”
