The Financial Conduct Authority’s drawdown comparison tool will not be the solution to drive competition in the decumulation market, according to Tom McPhail.
Speaking at the Pensions and Lifetime Savings Association (PLSA) annual conference in Liverpool today (19 October), Hargreaves Lansdown's head of policy said the comparator, as proposed by the regulator, would be "a really tough challenge to deliver".
In its retirement outcomes review published in June, the regulator had called for a drawdown comparison tool to be built in conjunction with the Money Advice Service (MAS) soon to be part of the new Single Guidance Finance Body.
This will allow non-advised consumers to make like-for-like comparisons of drawdown products, it said.
Steps to create a drawdown comparison tool had already been outlined by the Association of British Insurers (ABI) in April, which had called for joint action from the pensions industry and regulator to bring the tool to life.
Mr McPhail acknowledged a problem in that the majority of non-advised drawdown was estimated to be rolling over to the saver's existing provider.
But he said: "I have a lot sympathy with the FCA, they have to try to drive competition. But for that really to work, [the solution] is to engage with people earlier on, and getting them to think about that pot in their 40s, 50s, how much they've got, what are they going to do with it, and who they will want to do that for them."
Mr McPhail also said he believed the annuity market would make a comeback in a few years's time in the decumulation space.
He said: "We did some price sensitivity testing around annuities, and with all things being equal, it wouldn't take a significant upward movement in interest rates for people to start getting more interested in buying an annuity again."
A previous report published by Hargreaves Lansdown showed annuity sales could double by the mid-2020s, offsetting the pensions ‘dash for cash’ of late.
According to Mr McPhail sales of annuities will be driven by an appetite from later life buyers.
He said: "I think it is reasonable to anticipate that as those hundreds of thousands of people move on to their late 70s, a lot of them are going to look at buying an annuity.
"This is partly because of the increase in yield of annuities, partly because their health is deteriorating, and also because of their diminishing appetite for risk."
maria.espadinha@ft.com
