FCA forcing providers to reveal rival deals 'unprecedented'

FCA forcing providers to reveal rival deals 'unprecedented'

The industry has generally responded in favour of new rules forcing providers to prompt customers to shop around before purchasing an annuity.

However, some have done so with reservations, with one provider calling the new rules from the regulator requiring providers tell their customers where they can get the best rates even if they are available from a competitor an "unprecedented interventionist approach".

Others called for the regulator to go further.

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On Friday (25 November), the FCA announced annuity providers would be required to tell their customers where they can get the best rates through what it called a "“annuity comparator”.

The City watchdog proposed this comparator take the form of an information prompt before an annuity is purchased.

Stephen Lowe, group communications director at Just Retirement, said: “The failure of some providers to explain the benefits to consumers of shopping around when purchasing a guaranteed income for life product has been a longstanding problem.

"The FCA is taking positive steps to address this problem but we think there is a strong case to go further and make it a requirement for all purchases to be made via the open, external market to ensure consumers get the best deal.”

Philip Brown, head of policy at LV Life and Pensions said the new rules were "very welcome". 

Mr Brown said: "We have long argued that people should be encouraged to shop around at retirement and seek regulated financial advice to make sure they get the most from their money. 

"It is both unfortunate and disappointing that consumer switching has decreased since the introduction of the pension freedoms and this initiative from the FCA should go some way to reversing this trend.”

Richard Parkin, head of pensions policy at Fidelity International, also welcomed the move, but added it would "only go so far".

He said: "Many find the prospect of shopping around complex and overwhelming. Others may feel the time it takes is not worth the effort. We believe the best way of getting people to shop around is to do it for them.

"Annuities are still the only product that delivers guaranteed lifetime income. Restoring confidence in this important market is essential for all of the pensions industry," he said.

Jon Greer, pensions expert at Old Mutual Wealth, said the proposals from the FCA, while unsurprising since the new rules were signposted earlier this summer, "represents an unprecedented interventionist approach."

He said: "It is hard to think of another market where a company is forced to promote a cheaper product from a competitor at the point of sale.

"The fact we have reached this stage illustrates the degree of frustration at the apparent lack of progress in increasing competition in the annuity market."