This morning (26 March) the Financial Conduct Authority published its final retirement income market study findings, here FTAdviser takes a deeper dive into the paper to pick out seven key themes you may have missed.
1. Five headline remedies.
In light of provisional findings, the FCA proposed five remedies to address the concerns identified.
As reported earlier, the regulator proposed that firms provide an annuity quotation comparison for those that had chosen to buy an annuity which the regulator hopes will encourage people to shop around.
It also made recommendations to improve the way information is ‘framed’ to consumers to help them make decisions, and told firms to redesign and behaviourally trial the information that consumers receive from their providers in the run up to their retirement was also suggested.
In the longer term, the FCA says it is in discussions with government to explore the most effective and efficient way to develop a ‘pensions dashboard’, with a view to implement this over the next few years.
It will also monitor and track market developments and consumer behaviour in light of pension freedoms.
2. Work is underway.
In terms of the annuity quote comparison and replacing wake-up packs along with the Association of British Insurers, the FCA restated the importance of thorough behavioural trials to ensure that they are effective.
The regulator will consult on these proposed rule changes as part of its wider review of rules in the pensions and retirement area this summer. It estimates firms will be required to implement these two remedies in 2016.
A popular pensions dashboard suggestion is also under discussion with government, exploring the most effective and efficient way to develop a solution.
3. Monitoring guidance.
The regulator promised to monitor the market to track developments, consumer behaviour and outcomes, as well as the take-up of the Pension Wise service.
This will feed into the development of a common FCA view of the pensions and retirement area, in line with its publicly stated intention to create a common regulatory view of what is happening in each of the markets.
4. Market developments.
Since the FCA began the retirement income market project, it has witnessed providers developing their propositions, although primarily by augmenting or broadening existing offerings rather than developing entirely new products.
It did however note innovation and significant operational resources being dedicated to firms’ distribution propositions and engagement with consumers - and it praised advisers for amending charges to reach more customers with smaller pots.
5. Supply chain innovation.
The City watchdog said it was continuing to see firms develop and deploy new or enhanced distribution propositions in response to the new landscape.
There continues to be a move - particularly by life insurance providers - towards direct-to-consumer being developed. Many of these are online combined with telephony support, with propositions including guidance, decision trees, tools and calculators.
The FCA warned that those developing such tools will need to be mindful of the boundaries between services that are information only, regulated advice and a personal recommendation.