Consumers are overwhelmingly more likely to stay with their existing provider if they are not advised, the Financial Conduct Authority has found.
The findings of the regulator’s retirement outcomes review echoed some of the results the FCA has found in earlier research.
The regulator has said this is because consumers who are accessing their pots early and without taking advice are typically following the “path of least resistance”.
Among the regulators other concern is that the proportion of consumers going into drawdown without advice is increasing.
Before pension freedoms, 5 per cent of drawdown was bought without advice compared to 30 per cent now.
The FCA carried out consumer research to find out why consumers did not shop around.
The FCA's 122-page report published today (12 July) stated: “Most did not consider that they had made a choice about a retirement income product at that stage.
“As a result hardly any considered what to do with their remainder of the pot, with most taking the ‘path of least resistance’ and purchasing drawdown with their accumulation provider.
“When asked directly by our research moderator to talk through the pros and cons of searching the market for an alternative drawdown provider, most said that they doubted there would be much to gain by moving elsewhere and generally felt that there would be little difference in the products on offer.
“Most had no idea where to go to shop around, or how to compare one drawdown proposition against another.
“If forced to choose, they would most likely focus on general features, such as brand recognition or trust rather than specific features such as charges or fund choices.”
The FCA’s analysis of data from the Association of British Insurers found 70 per cent of non-advised annuity sales and 94 per cent of non-advised drawdown sales were to providers’ existing customers.
This compared to 15 per cent and 35 per cent respectively for advised sales.
damian.fantato@ft.com
